It’s simply economics, stupid!
Glenwood Springs, CO Colorado
Today’s column is directed to Mitt Romney, Paul Ryan, Grover Norquist and anyone of similar ilk who thinks that reducing taxes on the wealthy will create jobs and boost the economy. They just don’t get it.
No matter what you think about the wealthy, it should be obvious that they didn’t get where they are by being dumb. They are not going to invest in their businesses and hire more workers if they don’t see a growing market for the goods and services they provide.
And why do they see little prospect for growth? It is simply a matter of economics.
For many years, technological improvements have greatly increased the productivity of America’s workers, but the financial benefit of that growing productivity has not been shared with them. Wealthy corporate owners have hoarded for themselves virtually all of the increase in corporate profits arising from increased productivity, instead of sharing it with the workers who played a crucial role in creating those profits.
As a result of this upward redistribution of income, workers (the backbone of the middle class) have seen their wages stagnate and their purchasing power decline. They no longer have the discretionary income needed to reinvigorate the economy.
In the early 1900s, Henry Ford revolutionized the automobile industry by introducing assembly-line mass production. He realized that two things were necessary in order to expand the market for the number of cars his factory was capable of turning out. The price of the cars had to be within the reach of the working class, and the wages of the working class had to be raised to increase their reach.
So he more than doubled wages and instituted profit-sharing with his workers. Problem solved!
Under the stress of World War II, American industry tremendously increased productivity, and its well-paid workers (who could find little to buy) accumulated significant savings. When the war ended, that combination ushered in a boom economy that lasted for decades, with both businesses and the middle class thriving. Everyone was making money.
The middle class was well paid and had the purchasing power to keep the economy booming. And although the top income tax bracket was more than twice what it is today for much of that time, there was no shortage of money to invest in expanding production to serve the aspirations of the middle class.
Incidentally, the reason for the high tax rates on the wealthy was to pay down the huge national debt incurred in fighting the war, something our federal government has since been unwilling to do.
And when the Reagan administration greatly reduced the tax rates on the wealthy on the supposition that it would boost the economy and benefit everyone (the “trickle down” theory), all it accomplished was to double the national debt.
Problem not solved!
It should be obvious that there will be no economic recovery from the current malaise until the middle class acquires the income needed to drive that recovery. And what is needed to achieve that goal is a redistribution of income back to the middle class from the wealthy, who should realize that has to happen before there can be an economic recovery.
And the next presidential administration and Congress should recognize that our burgeoning national debt cannot be paid down without increasing revenues.
Raising taxes on the middle class would be counterproductive because our economy rises and falls with the prosperity of the middle class. Additional tax money needs to come from those who have the ability to pay, and the past has clearly demonstrated that the wealthy can afford higher tax rates without creating a hardship for them or harming the economy.
It also might encourage them to share some of their profits with their employees (instead of the government), increasing workers’ purchasing power, and benefiting the economy for everyone.
So far I have confined my comments to the middle class and the wealthy. We should not ignore the poor – those working for the minimum wage of $7.25 and hour, which figures out to $15,080 a year.
Everyone working a full-time job should be paid a living wage, sufficient to provide food, clothing and shelter for their families. Anything less is unconscionable.
Taxpayers complain about the government using their tax money to supplement the incomes of the poor. If the government adopted an $11-an-hour minimum wage, which would require employers to pay a living wage (as they should), the government could get out of this supplement business – just what taxpayers want.
– “As I See It” appears on the first and third Thursdays of the month. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at firstname.lastname@example.org.
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