The far right in this country has managed to shift the whole political spectrum to the right in the last thirty years. While most of the conservatives on talk radio and Fox News would have everyone believe that the exact opposite is underway, the right wing media has managed to use propaganda very effectively in this country since Reagan eliminated the Fairness Doctrine (see my posts Propaganda? and the Fairness Doctrine). Reagan himself was the first to successfully demonize the liberals in this country but he has been followed by many others with even more right wing conservative agendas; to the point that the political middle in this country today has shifted drastically to the right. To a certain extent the pendulum swing of politics is inevitable in a democratic based government, but the effective use of propaganda techniques utilized by the far right has shifted things further than any other time in recent history in this country.
I would like to point out a few examples of what I am talking about. As I have written about in a past post (The Redistribution of Wealth Parts I and II) we have seen a rather drastic upward shift in the wealth of this country since Reagan took office in 1980. This is the direct result of changes in our basic tax structure. Reagan cut income taxes for the wealthiest Americans some 40% and started a trend that has more or less continued without pause in the ensuing 30 years. What is less well understood is that cuts of an even more drastic measure were also made in other taxes designed to tax the wealthiest Americans; inheritance taxes, luxury taxes, and capital gains taxes. At the same time even though corporate taxes are posted at 35%, loopholes for the largest corporations have culminated with 8 of the top 12 corporations on the Fortune 500 list not only paying NO income tax last year; but also receiving almost 4 billion dollars in tax credits. The combination of these policies has resulted in the top 1% of wealthiest Americans now owning 45% percent of the wealth in this country instead of the 17% they owned when Reagan came into office.
If the right wing argument that cutting taxes is the best way to stimulate the economy actually held true we should be in the biggest economic boom this country has ever seen after the tax policies of the last 30 years. Instead, we find ourselves in the worst economic downturn since the Great Depression brought about by the unimaginable greed of the wealthiest Americans. Where is the great investment in jobs and infrastructure that Reagan and his supporters predicted? It is in the internationally collapsed financial markets that the average American financed with huge losses to his 401K and hard earned retirement plan. Almost all of corporate America is healthy and showing near record profits but we don’t see job creation or infrastructure investment in this country. Instead, we see continuing shifts of jobs overseas and more investment in the same financial markets that collapsed the last time and had to be bailed out by the US government. Leaving aside the fact that it is reprehensible that the wealthiest amongst us just received government bailouts of their business interests it is plain that the jobs creation that tax cuts were supposed to produce are actually jobs overseas. Financial derivatives markets that are more profitable than production are the favored investment for this money and will continue to be as long as the tax structure remains tilted in favor of this type of market. Anyone who takes a look at the new Republican budget plan fostered by Paul Ryan will quickly see that one of the tenets of this plan is the further reduction and elimination of capital gains taxes. What we should actually be doing to stimulate the creation of jobs is raising capital gains taxes on these unregulated markets. This would induce investors to invest in industries that actually create jobs instead of putting all of their money in financial markets and overseas manufacturing owned by US companies that are specifically designed and structured to avoid paying US taxes. Investors seek profit so as long as there is greater profit margin in financial markets as opposed to manufacturing or production we will not see jobs created in these markets.
One form of conventional wisdom that the right wing loves to express concerning tax systems is that cutting taxes stimulates the economy. As I have noted in several other posts, a fair taxation system is one that taxes according to the benefit one receives from the government. The US government has explicitly been corporate business oriented since WWII in this country, especially since the Reagan years. The massive buildup of defense spending which Reagan used to boost the economy by doubling the money spent on defense spending in the first five years of his administration was a stimulus program aligned directly towards lining the pockets of the biggest American corporations. Reagan cut taxes on the wealthiest Americans while he at the same time fed them the largest increase in government spending ever seen up until that time in the form of defense contracts. It is little wonder that the budget deficit that we are still struggling with today originated during Reagan’s term. Reagan managed to more than double the deficit in just eight years; a feat that has not been matched before or since. It is true that Reagan cut taxes, what is not usually understood is that he stimulated the economy by doubling our defense spending and that all of this extra 600 billion dollars went to large American corporations. If this isn’t bad enough, the extra spending went directly towards the deficit because we also cut government revenue in the form of taxes at the same time.
Another conventional wisdom along the same lines is that any increase in taxes on the wealthiest Americans leads directly to a decline in our economy. The basis of this particular myth is an attempt to directly correlate profit margins with taxes. The gist of the myth is as follows; since the wealthiest Americans are the ones who have money to invest and create jobs, raising their taxes leads directly to them cutting their investment and raising prices. In the first place, if American investors are so averse to paying taxes that they want to invest overseas to avoid it I suggest that they do so. What they will find is that without the force of the US government backing their investments with foreign policies explicitly designed to further their profits they will find the sledding a little tougher. Again, it goes back to the fact that they are the beneficiaries of a government system friendly to their interests and should be willing to repay the subsidies and support they get by paying their fair share of the taxes needed to support the government. Second, it is both disingenuous and ridiculous to suggest that higher taxes lead directly to higher prices. Oddly enough, such muddled logic is espoused by the same people who purport to be the biggest supporters of free markets and the capitalist system. Even a casual acquaintance with capitalist theory leads to the understanding that profits are based upon supply and demand; not some arbitrary decision by the owner of the manufacturing interest as to what his profit margin should be. I would suggest that if owners could set profit margins based strictly upon what they want to make, no one could afford to buy any of their products. In other words, profit maximization is one of the basic tenets of capitalism. Owners of manufacturing interests maximize profits as a matter of course based upon pricing that is the maximum that the market will bear; not upon what profit margin they would like to realize. To suggest that raising taxes on these owners will lead directly to them passing this cost directly along to the consumer is to suggest that they can somehow suspend the free market system in favor of some imaginary notion of desirable profit margins.
Another conventional wisdom that the conservatives love to use as camouflage is the idea that small business owners who create most of the jobs in this country are being stifled by high tax rates. As in most common sense ideas there is a grain of truth to this notion. Small businesses without the means to hire large teams of tax attorneys do wind up paying the high tax rates and this is without a doubt a drain on their ability to create jobs. However, what most conservatives don’t like to admit is that the statistics they like to throw around about “small business” include some of the largest corporations in this country. The classification itself is so skewed as to be meaningless under current government regulations. What we really need to do is separate small business owners from the large corporate interests they are grouped with in our efforts to stimulate small business. I am all for giving tax breaks to companies under 100 employees or some like category. However, the current definition of the term “small business” allows some of the largest companies in this country to fall under this heading. It is this heading that conservatives from both parties use to disguise the fact that there is a difference between what most Americans consider a small business and what the US government specifies as a small business. This gives them the ammunition they need to loudly proclaim the sad stories about actual small businesses suffocating under high taxes and continue to attempt to cut taxes for all business interests, including those that are not paying taxes now because they can afford to hire teams of attorneys to find loopholes in the system.
This same tactic is used in the income tax tables for individuals. Currently in this country those that make from 53 to 174 thousand dollars in this country pay 28% of their income in federal income tax. The highest rate is 35% for those reporting above 379 thousand dollars in income. It is indeed debatable where the dividing line should be for paying higher rates of tax but I don’t think anyone in this country could reasonably argue that someone who makes 53 thousand dollars gets the same benefit to his business interests that someone who makes 379 thousand dollars from living in this country. Let’s take this analogy a little further and compare someone who makes 53 thousand dollars and someone who makes 2 million dollars a year. Can anyone seriously suggest that both receive the same benefit to their interests from the US Government? In previous years, when the US deficits were small and manageable, we had a progressive tax rate that topped out from 70-90% for the highest wage earners. However, these tax brackets were also progressive for much higher incomes. In other words, the tax tables topped out from 1 to 5 million dollars and were graduated accordingly. Who benefits the most by grouping themselves with those who earn less in deciding what their tax rate will be? It is not accidental that the top brackets were lowered when Reagan came along as it makes it possible for the very wealthiest to group themselves with those who make much less income. In reality the business interests most favored by living under the US government are the very wealthiest Americans and a tax table that accurately reflects this would in fairness progress at a much steeper rate for those Americans who make the highest incomes.
Much has been made recently about excessive executive compensation, especially amongst those large companies that the US taxpayer recently bailed out. The rate of pay for top US executives is literally hundreds of times higher than they are in the rest of the world. They are also on average some 700 times higher than they were just thirty years ago in this country. What is not well understood is that the elimination of the higher tax brackets that Reagan brought about during his administration was the catalyst for this change. There is a direct correlation between the Reagan tax cuts and the beginnings of the runaway executive pay system. I would also point out that there is a direct correlation between these astronomical rises in compensation for top executives based upon profit margins for the corporations they manage and the rise of corporate fraud and illegal bookkeeping practices that have crashed numerous large corporate entities in this country in the last 30 years. It is simply too tempting for many of these executives to obtain almost limitless wealth by cooking the books and often destroying their own companies in the process. This factor should not be underestimated in many of the recent large financial disasters that recently crashed the world economy. By replacing the top 35% brackets with 90% brackets we could remove much of the temptation for such avarice while at the same time adding immensely to government revenue at a time when we are suffering from record deficits.
If anyone is unconvinced that we have swung to the far right of the political spectrum in this country, try to remember the last time you heard any such discussion on the US tax structure on a news network. In actuality, what we hear is not discussion at all but carefully choreographed commercials aimed at convincing us that anyone who dares suggest higher taxes is either a socialist or simply unable to understand basic economic theory. Meanwhile, the rich get richer and the working middle class is disappearing under a mountain of seemingly insurmountable public and private debt.
Showing posts with label redistribution of wealth. Show all posts
Showing posts with label redistribution of wealth. Show all posts
Tuesday, April 12, 2011
Thursday, September 9, 2010
Redistribution of Wealth Part 1
As a somewhat reluctant follower of the talk radio I have noticed this phrase getting a lot more usage in the last couple of years. It is usually tied to some sort of diabolical socialist plot to take money out of the working man’s pocket and give it to a lazy, shiftless group of people who do not work. Supposedly, there is a vast group of people in this country standing around with their hands out waiting on the Democratic Party to send them a check. I suppose this can be traced all the way back to Reagan’s fanciful “welfare queen” that he created from whole cloth as a sort of symbol of encroaching ruin for the country. Even though the people that Reagan spun parables about did not actually exist, they were a caricature that he was able to make stick. Reagan, like all demagogic types, understood that people didn’t want to hear about real problems that might be associated with their own actions. People understood there was a problem. They could see it all around them in unemployment, high interest rates, and a stagnant general economy and Reagan simply gave them a straw man to blame it on. Big government was robbing them to pay people who didn’t want to work. Reagan suggested that cutting taxes would allow people to reinvest their own money in the economy rather than give it to the government who would inevitably waste it. Reaganomics was an idea born of the idea that the American public is basically ignorant of economics in general. Since it was such a successful propaganda tool for Reagan it has since come to be the mantra of the right wing conservatives everywhere in one form or the other. Maybe we should take time to look at how it actually worked out now that we have about 30 years of experience with this philosophy.
The basic philosophy of Reaganomics is that a rising tide floats all boats. In other words, the investment dollars of the rich go directly into creating jobs instead of going to the federal government in the form of taxes. This is underlined with the oft repeated “proofs” that the government will just waste your money anyway; usually with the insinuation that this waste will be in the form of giveaways to people who are basically too lazy to work. Reagan made an art form out of this description and repeated it so often and so persuasively that people began to believe it. It is now accepted fact in almost all right wing conservative movements; the basic core that most of their system is built around. In Reaganomics the cutting of taxes for the rich allows them to invest in the economy and create jobs. As more jobs are created everyone benefits; hence the rising tide analogy. It sounds like basic common sense which is exactly why it is so widely believed.
When Reagan ran for President in 1980 against Jimmy Carter there could hardly have been a wider divergence in their relative beliefs about the American system. Carter was suggesting that Americans should tighten their belts, cut down their thermostats, and be responsible for helping the country pull itself out of the recession that we were all in together. Reagan suggested that the recession and most of our other problems were the direct result of big government. In other words, it wasn’t our fault so why should we suffer for it? He needed a scapegoat of course and he found it in the “welfare queens” who were draining all of our hard earned tax money out of the economy. Everyone could see there was a problem with such systems wherein several generations of families were living off the government dole but Reagan took it to new heights. It was a fitting symbol of the disaster that was the government according to Ronald Reagan. His solution was to cut government spending while at the same time cutting taxes to increase investment.
Reagan won the election and immediately set about implementing his program. The interesting thing about Reagan was that he was a pragmatist first, a conservative second. In other words, he had no problem saying one thing and doing another, it had been his mode of operations for as long as he had been in politics. He did initially cut taxes but raised them numerous times afterwards. The first tax cuts were not very successful at stimulating the economy as unemployment went up after they were enacted. What did stimulate the economy was a massive increase in federal spending through the military and the industrial complex that Eisenhower has warned the country about as he left office. In other words, Reagan’s “miraculous” economic recovery was simply a matter of pouring federal money into defense programs; money that we didn’t have to spend. The national debt when Reagan took office was a little less than 2 trillion dollars. It had been at roughly this same rate since 1945 when adjusted for inflation. By the time Reagan left office in 1988 it was a little over 4 trillion. Reagan more than doubled the national debt in 8 years when it had remained virtually the same for the previous 35 years. The massive buildup for World War II cost a little over a trillion dollars to our national debt yet Reagan and his economic plan cost 2 trillion and we were not fighting a war. Reagan coined the phrase that “government is not the solution; government is the problem” during his run for governor of California in the last sixties. He sold Americans on the idea that he would cut the government but he actually more than doubled the cost of government in just 8 years.
Unfortunately, Reagan proved to politicians everywhere that the truth doesn’t matter; what really matters is how you spin it and what you make people believe. He started a massive upward spiral in government spending that hasn’t stopped yet. In the ensuing 17 years after he left office the federal deficit grew to an astonishing 9 trillion dollars as politicians spent like drunken sailors while espousing the same principals. The key to getting elected it seems is to guarantee the economy is booming and politicians from Bush Sr. to Bush Jr. learned this lesson well. There was a brief downturn in federal spending under Clinton but it was quickly curtailed when the economy started to droop again. Vice President Cheney in a moment of rare clarity pointed out that “Reagan proved that deficits don’t matter” when questioned about it during Bush Junior‘s last term in office. It is a little ironic that the man who was elected on the promise of reducing government actually started a trend in government spending that led directly to a five-fold increase in government deficits over the next 25 years and led directly to the economic collapse the we are experiencing today but I will go into that in a later post. For the moment I would like to concentrate on what the other result of Reaganomics wound up being; the drastic redistribution of wealth in this country from the middle class to the very wealthiest amongst Americans.
Reagan’s basic premise was that by reducing taxes on the wealthy they would invest that money in the economy which would lead to more jobs; thus the infamous “trickle down” theory that one still hears bandied about by those with no understanding of economics. By cutting taxes on the very rich Reagan did two things; he increased the deficit by cutting the amount of money the government took in and he increased the wealth of the wealthiest Americans drastically. You might ask yourself how this happened but it was really a very simple two pronged approach. First, cutting taxes on the wealthy was not simply a matter of cutting income tax it included Estate taxes, and all manner of taxes on accumulated wealth. All the tax cuts since the 1980’s have favored the wealthiest American’s and corporations. Second, the massive federal spending into military and defense corporations wound up stimulating the stock market into frenzy and as I will show a little later, it is overwhelmingly the richest Americans who own stocks and bonds.
Let’s start with income taxes on the richest Americans. Reaganomics says that dropping these taxes increases economic activity. The truth is that in a period from 1940 to 1970 during which the United States saw the greatest increase in economic power ever seen on this planet the income tax rate on the top earners in the United States stayed steady at 70%. During a period of unprecedented growth and economic prosperity that has not been equaled before or since, a period that saw massive growth of infrastructure, schools, electrical grids, highway systems, and nearly every other indices of governmental performance the income tax rate for the highest earners was always above 70%. This was also a period during which dividends from stocks and bonds were taxed at the same rate as all other income, unlike today when it is not taxed in many cases, yet we saw continuous and massive economic growth. In the period since Reagan taxes on the highest income brackets have fell to less than 30% and there are numerous loopholes that allow dividends to be ignored in this accounting. Most estimates of the actual income tax rate that winds up being paid into the system by the wealthiest Americans are now around 17%. Warren Buffet pointed this out in an interview with Tom Brokaw in 2007 when he admitted that he paid tax on only some $97,000 of his 66 million dollar income. Buffet contrasted this with the average member of his staff how paid some 39% of their total income on combined taxes that same year. If Reagan was right we should be in the midst of the greatest economic boom in history. Unfortunately, what we are actually seeing is a wasting away of the infrastructure that was built in this country from 1940- 1970. Electrical grids, schools, roads, and almost every system that the government supports are in a state of collapse these days. The only government sponsored activity that seems to be doing well is the military industrial complex but I guess a 6 trillion dollar increase in the deficit would be nearly impossible to blow without having something to show for it.
Obviously, the cuts in taxes should be stimulating the economy and increasing productivity if Reagan was right. This should have “trickled down” to all of us by now but it seems there is a flaw in the plan. The rich are definitely getting richer but for some reason it doesn’t seem to be trickling down. Between 1947 and 1973 both worker productivity and worker median income doubled. From 1980 to 2005 worker productivity increased some 70% while worker median income increased 19%. This seems impossible until one finds that during this same period from 1980 to 2005 the top 1% of wealthiest Americans increased their percentage of the total income produced in this country from 8.2% to 17.4%. Favorable tax rates on both income and wealth and the massive fluctuations in the stock markets are the simplest explanations. The top 1% of wealthiest Americans owned some 23% of the total wealth in this country in 1979. Today they own around 43% of the total wealth in the country. This isn’t the whole story unfortunately. Not only have income taxes for the very rich dropped but estate taxes and capital gains taxes have fallen drastically as well. As a matter of fact the federal tax burden has shifted dramatically since 1980 with the percentage of tax revenues actually being collected shifting dramatically towards payroll taxes. Since 1980 the payroll tax burden has risen 25% as a share of total tax income. During this same period the percentage of tax revenue generated by capital gains tax on investments has fallen 31% and the percentage of tax revenue generated by estate taxes has fallen 46%. There has been a massive redistribution of wealth in the last 30 years but it isn’t going from tax payers to the indigent; it is going from taxpayers to the wealthiest Americans. Instead of “trickle down” economics what we actually have is “sucking up” economics. It is as if there is a giant vacuum at the top pulling everything that way.
The truth of the matter is that Reagan as president was the same thing he had been before; an unemployed actor who worked as a shill for corporate America. According to studies by the World Institute for Development Economics Research what we have actually seen in the last 30 years is a massive concentration of wealth and earning power in large corporations. Over 40% of the GNP of the United States comes from 500 largest conglomerates in the country. According to studies recently released by this group these companies control over two thirds of total American business sources, employ two thirds of the industrial workers in this country, account for 60% of total sales and collect over 70% of total profits. In 1955 corporate tax income paid some 33% of the total taxes taken in by the Federal Government. In 2007 this number had decreased to 14%. In other words, entities that gobble up 70% of the total profits made in this country pay in 14% of the taxes. No wonder corporate America deifies Ronald Reagan. One can hardly imagine a more favorable climate for corporate growth than such a system yet we are still on the verge of economic collapse in this country.
The basic philosophy of Reaganomics is that a rising tide floats all boats. In other words, the investment dollars of the rich go directly into creating jobs instead of going to the federal government in the form of taxes. This is underlined with the oft repeated “proofs” that the government will just waste your money anyway; usually with the insinuation that this waste will be in the form of giveaways to people who are basically too lazy to work. Reagan made an art form out of this description and repeated it so often and so persuasively that people began to believe it. It is now accepted fact in almost all right wing conservative movements; the basic core that most of their system is built around. In Reaganomics the cutting of taxes for the rich allows them to invest in the economy and create jobs. As more jobs are created everyone benefits; hence the rising tide analogy. It sounds like basic common sense which is exactly why it is so widely believed.
When Reagan ran for President in 1980 against Jimmy Carter there could hardly have been a wider divergence in their relative beliefs about the American system. Carter was suggesting that Americans should tighten their belts, cut down their thermostats, and be responsible for helping the country pull itself out of the recession that we were all in together. Reagan suggested that the recession and most of our other problems were the direct result of big government. In other words, it wasn’t our fault so why should we suffer for it? He needed a scapegoat of course and he found it in the “welfare queens” who were draining all of our hard earned tax money out of the economy. Everyone could see there was a problem with such systems wherein several generations of families were living off the government dole but Reagan took it to new heights. It was a fitting symbol of the disaster that was the government according to Ronald Reagan. His solution was to cut government spending while at the same time cutting taxes to increase investment.
Reagan won the election and immediately set about implementing his program. The interesting thing about Reagan was that he was a pragmatist first, a conservative second. In other words, he had no problem saying one thing and doing another, it had been his mode of operations for as long as he had been in politics. He did initially cut taxes but raised them numerous times afterwards. The first tax cuts were not very successful at stimulating the economy as unemployment went up after they were enacted. What did stimulate the economy was a massive increase in federal spending through the military and the industrial complex that Eisenhower has warned the country about as he left office. In other words, Reagan’s “miraculous” economic recovery was simply a matter of pouring federal money into defense programs; money that we didn’t have to spend. The national debt when Reagan took office was a little less than 2 trillion dollars. It had been at roughly this same rate since 1945 when adjusted for inflation. By the time Reagan left office in 1988 it was a little over 4 trillion. Reagan more than doubled the national debt in 8 years when it had remained virtually the same for the previous 35 years. The massive buildup for World War II cost a little over a trillion dollars to our national debt yet Reagan and his economic plan cost 2 trillion and we were not fighting a war. Reagan coined the phrase that “government is not the solution; government is the problem” during his run for governor of California in the last sixties. He sold Americans on the idea that he would cut the government but he actually more than doubled the cost of government in just 8 years.
Unfortunately, Reagan proved to politicians everywhere that the truth doesn’t matter; what really matters is how you spin it and what you make people believe. He started a massive upward spiral in government spending that hasn’t stopped yet. In the ensuing 17 years after he left office the federal deficit grew to an astonishing 9 trillion dollars as politicians spent like drunken sailors while espousing the same principals. The key to getting elected it seems is to guarantee the economy is booming and politicians from Bush Sr. to Bush Jr. learned this lesson well. There was a brief downturn in federal spending under Clinton but it was quickly curtailed when the economy started to droop again. Vice President Cheney in a moment of rare clarity pointed out that “Reagan proved that deficits don’t matter” when questioned about it during Bush Junior‘s last term in office. It is a little ironic that the man who was elected on the promise of reducing government actually started a trend in government spending that led directly to a five-fold increase in government deficits over the next 25 years and led directly to the economic collapse the we are experiencing today but I will go into that in a later post. For the moment I would like to concentrate on what the other result of Reaganomics wound up being; the drastic redistribution of wealth in this country from the middle class to the very wealthiest amongst Americans.
Reagan’s basic premise was that by reducing taxes on the wealthy they would invest that money in the economy which would lead to more jobs; thus the infamous “trickle down” theory that one still hears bandied about by those with no understanding of economics. By cutting taxes on the very rich Reagan did two things; he increased the deficit by cutting the amount of money the government took in and he increased the wealth of the wealthiest Americans drastically. You might ask yourself how this happened but it was really a very simple two pronged approach. First, cutting taxes on the wealthy was not simply a matter of cutting income tax it included Estate taxes, and all manner of taxes on accumulated wealth. All the tax cuts since the 1980’s have favored the wealthiest American’s and corporations. Second, the massive federal spending into military and defense corporations wound up stimulating the stock market into frenzy and as I will show a little later, it is overwhelmingly the richest Americans who own stocks and bonds.
Let’s start with income taxes on the richest Americans. Reaganomics says that dropping these taxes increases economic activity. The truth is that in a period from 1940 to 1970 during which the United States saw the greatest increase in economic power ever seen on this planet the income tax rate on the top earners in the United States stayed steady at 70%. During a period of unprecedented growth and economic prosperity that has not been equaled before or since, a period that saw massive growth of infrastructure, schools, electrical grids, highway systems, and nearly every other indices of governmental performance the income tax rate for the highest earners was always above 70%. This was also a period during which dividends from stocks and bonds were taxed at the same rate as all other income, unlike today when it is not taxed in many cases, yet we saw continuous and massive economic growth. In the period since Reagan taxes on the highest income brackets have fell to less than 30% and there are numerous loopholes that allow dividends to be ignored in this accounting. Most estimates of the actual income tax rate that winds up being paid into the system by the wealthiest Americans are now around 17%. Warren Buffet pointed this out in an interview with Tom Brokaw in 2007 when he admitted that he paid tax on only some $97,000 of his 66 million dollar income. Buffet contrasted this with the average member of his staff how paid some 39% of their total income on combined taxes that same year. If Reagan was right we should be in the midst of the greatest economic boom in history. Unfortunately, what we are actually seeing is a wasting away of the infrastructure that was built in this country from 1940- 1970. Electrical grids, schools, roads, and almost every system that the government supports are in a state of collapse these days. The only government sponsored activity that seems to be doing well is the military industrial complex but I guess a 6 trillion dollar increase in the deficit would be nearly impossible to blow without having something to show for it.
Obviously, the cuts in taxes should be stimulating the economy and increasing productivity if Reagan was right. This should have “trickled down” to all of us by now but it seems there is a flaw in the plan. The rich are definitely getting richer but for some reason it doesn’t seem to be trickling down. Between 1947 and 1973 both worker productivity and worker median income doubled. From 1980 to 2005 worker productivity increased some 70% while worker median income increased 19%. This seems impossible until one finds that during this same period from 1980 to 2005 the top 1% of wealthiest Americans increased their percentage of the total income produced in this country from 8.2% to 17.4%. Favorable tax rates on both income and wealth and the massive fluctuations in the stock markets are the simplest explanations. The top 1% of wealthiest Americans owned some 23% of the total wealth in this country in 1979. Today they own around 43% of the total wealth in the country. This isn’t the whole story unfortunately. Not only have income taxes for the very rich dropped but estate taxes and capital gains taxes have fallen drastically as well. As a matter of fact the federal tax burden has shifted dramatically since 1980 with the percentage of tax revenues actually being collected shifting dramatically towards payroll taxes. Since 1980 the payroll tax burden has risen 25% as a share of total tax income. During this same period the percentage of tax revenue generated by capital gains tax on investments has fallen 31% and the percentage of tax revenue generated by estate taxes has fallen 46%. There has been a massive redistribution of wealth in the last 30 years but it isn’t going from tax payers to the indigent; it is going from taxpayers to the wealthiest Americans. Instead of “trickle down” economics what we actually have is “sucking up” economics. It is as if there is a giant vacuum at the top pulling everything that way.
The truth of the matter is that Reagan as president was the same thing he had been before; an unemployed actor who worked as a shill for corporate America. According to studies by the World Institute for Development Economics Research what we have actually seen in the last 30 years is a massive concentration of wealth and earning power in large corporations. Over 40% of the GNP of the United States comes from 500 largest conglomerates in the country. According to studies recently released by this group these companies control over two thirds of total American business sources, employ two thirds of the industrial workers in this country, account for 60% of total sales and collect over 70% of total profits. In 1955 corporate tax income paid some 33% of the total taxes taken in by the Federal Government. In 2007 this number had decreased to 14%. In other words, entities that gobble up 70% of the total profits made in this country pay in 14% of the taxes. No wonder corporate America deifies Ronald Reagan. One can hardly imagine a more favorable climate for corporate growth than such a system yet we are still on the verge of economic collapse in this country.
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