One of the most pernicious falsehoods you'll hear during the next seven months of political campaigning is there's a necessary tradeoff between fairness and economic growth. By this view, if we raise taxes on the wealthy the economy can't grow as fast.
Wrong. Taxes were far higher on top incomes in the three decades after World War II than they've been since. And the distribution of income was far more equal. Yet the American economy grew faster in those years than it's grown since tax rates on the top were slashed in 1981.
This wasn't a post-war aberration. Bill Clinton raised taxes on the wealthy in the 1990s, and the economy produced faster job growth and higher wages than it did after George W. Bush slashed taxes on the rich in his first term.
If you need more evidence, consider modern Germany, where taxes on the wealthy are much higher than they are here and the distribution of income is far more equal. But Germany's average annual growth has been faster than that in the United States.
You see, higher taxes on the wealthy can finance more investments in infrastructure, education, and health care -- which are vital to a productive workforce and to the economic prospects of the middle class.
Higher taxes on the wealthy also allow for lower taxes on the middle -- potentially restoring enough middle-class purchasing power to keep the economy growing. As we've seen in recent years, when disposable income is concentrated at the top, the middle class doesn't have enough money to boost the economy.
Finally, concentrated wealth can lead to speculative bubbles as the rich in the same limited class of assets -- whether gold, dotcoms, or real estate. And when these bubbles pop the entire economy suffers.
What we should have learned over the last half century is that growth doesn't trickle down from the top. It percolates upward from working people who are adequately educated, healthy, sufficiently rewarded, and who feel they have a fair chance to make it in America.
Fairness isn't incompatible with growth. It's necessary for it.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Joseph Rauch: Why Obama Should Raise Taxes in 2013
Martin Sullivan: Don't Equate Wealthy With Job Creators
I'll illustrate if I may. The economy is an air craft carrier (relatively speaking of course) Bush turns the rudder, depending upon the speed the aircraft carrier, it may take a mile to turn around and reverse course. Similarly a small ski boat (small company/entrepreneur) may make a decision and he can turn his boat around in 20-100’ at top speed 10-50 mph. The analogy is decisions today may take years for the outcome to be realized.
The economy is not like a light switch that Clinton or any president can just switch on and the lights come on full brightness. He knows better, but he can’t overcome his socialistic tendencies.
Now the German’s aren’t falling over wanting to pay taxes but they have a business structure that puts Union representatives on the boards of corporations. They get to see what impact their contracts have on the bottom lines of said companies, both in wages and benefits. Why do you think they were going on strike when the work weeks were being extended back to 40-hour work weeks. See attached link for history.
http://www.eurofound.europa.eu/eiro/1997/09/feature/de9709127f.htm
what are you talking about?
The White House claims that any first step to tax reform will ensure that the "rich don't take advantage of tax breaks or structure their affairs to pay less taxes." Huh?
The century-long history of the federal income tax teaches us one lesson over and over: The higher the tax rates, the more LOOPHOLES CONGRESS inserts as a way around those rates. LOOPHOLES created by CONGRESS is why the government collected roughly as much tax revenue as a share of GDP when the top tax rate was 70% in the 1970s as it did when the rate fell to 28% in 1986.
When will this administration proposes a real economic plan for tax reform? We certainly need one.
The top 10% pay 70% of the taxes while earning 45% of the income. The bottom 50% don't pay income taxes. The top are paying their fair share. The problem isn't revenue. Spending has gone up nearly 100% in the last decade. Government spending comprises a larger and larger percentage of our economy. Liberals like Reich won't be happy until all spending is government and the private sector is eliminated. Thanks but no thanks.
Please leave the class warfare out of it.
provide one or two names of American citizens you consider to be PARAGONS of capitalist virtues. these people must be self-made millionaires (or beyond); they cannot have inherited their wealth and they cannot be politicians
if you cannot even do that, then all of your blather about class warfare is simply kool-aid propaganda
And we are in little old Indiana.
http://philanthropy.com/items/biz/pdf/buffett_rule_legistlation.pdf
Why not mention that Germany provides nationalized health care too?
The fact is that the worker and the average citizen are told they suck and they are shamed enough to believe it. The daily dose of propaganda, religion and fear are used on our own citizenry, when will it end?
The reward - Economic growth.
The fact that Apple is so succesful and profitable encourages competition that will drive down costs and encourage improvements.
You state, ‘Wrong. Taxes were far higher on top incomes in the three decades after World War II than they've been since. And the distribution of income was far more equal.’
That statement belies a facile understanding of that period of our economy. True taxes were higher, but was that time a much more fair time and was our good economic fortune not hindered by those taxes?
If anything….
a) It was a much more unfair time, with blacks and women not accorded a ‘fair’ place in the workforce.
b) The poverty rate in the 1950’s was in the low 20 percentile.
c) Not many people owned stock in their companies or were even given the opportunity to buy stock
d) Wealth inequality was higher, and income inequality was no less high
e) Marginal tax rates may have been higher but tax revenue was no higher, meaning taxable activity was less. If anything subsequent tax cuts over the decades yet near constant normalized tax revenue vindicates the laffer curve.
f) Were those good times due to higher taxes or due to almost all other major economies under ruin or under the thumb of communism. Can we apply the same tax rates from then to a more competitive world today without ramifications?
g) Those higher taxes did not mean that the poor had it better, they paid higher taxes also and they had less transfer payments from the government as well as lower standards of living.
Kai
You state, ‘FACT that people who graduated high-school in the 50's and college in the early 60's of middle class.....accumulated more wealth by the time they were 40 or 50 years old then their children have today.’
That may be true but that is due to personal consumption preferences between the generations. What we do know is that studies confirm 81% of children are better off than their parents were economically.
http://www.economicmobility.org/assets/pdfs/Family_Structure.pdf
So note to recent generations, save more and spend less. Live like previous generation since real wealth is based on savings and investment, not spending, borrowing and consumption.
Kai
http://www.ted.com/talks/richard_wilkinson.html
“We need a law that anything possible to be made in the U.S. and is sold here; that 10% of that item be made in the U.S.
This law should not be limited to manufactured products but include things like raw materials also. To avoid the rare earth metals trap we all found ourselves.
For no other reason than for national security reasons. National security for all nations.
If you are making 10% of a product you have the brain trust to make the other 90%.
Maintaining 10% of a market for national interest is a good thing.
Imagine what the unemployment rate would be if we had manufacturing jobs for a third of the 35% of workers that lost their jobs after we gave China Permanent Most Favored Trade Status? Remember manufacturing jobs create dozens of other support jobs.
It is not only in our national security interest to have such a law bit our economic interest also!
All nations should have that kind of security!
But what have we seen happen? We've seen those at the top collect more and more profits, and as their wealth has increased, rather than create more jobs, they have expected fewer workers to do more work for less pay. And then they've exported the remaining jobs overseas, as labor outside of the US is far cheaper for them, and such moves allow them to rake in more and more profit. They don't want to "trickle down" -- they want to collect and hoard.
What they seem to be missing is that there will be no one to buy their products if everyone in the middle and lower classes is broke. An economy needs a thriving middle class in order to function. That is what creates jobs, and that is what creates a strong economy.
Under trickle-down economics, the entire system will eventually collapse because only those at the top will actually be able to participate in it. The harsh reality that they don't seem to grasp is that the top of the pyramid will crumble, too, when its foundation gives out.
i remember in the 90's anytime there was an issue of substance being debated, media focus (and this is before the internet and 24/7 cable punditry) would be diverted to such issues as southern states still having the confederate cross in their flags
it is time that EVERYONE, from tea party supporters to OWS demonstrators insist that ALL candidates answer questions in regard to the long term health of this country -
starting with campaign finance reform - people on BOTH sides of the issues can agree that the system is broken and the rules need to be changed, but unless BOTH sides agree that whoever is running for office agrees to fight IMMEDIATELY for this reform, nothing will happen and the "new" boss will simply morph into the "old" boss