The ‘redistribution of wealth’ delusion
Glenwood Springs, CO Colorado
Every time John McCain charged Barack Obama with wanting to “redistribute” wealth, his supporters responded with a chorus of boos. Don’t they recognize for the past eight years we have been the victims of a Bush-sponsored upward redistribution of wealth from the middle class to the wealthy? This redistribution has been a continuation of the cut-taxes-on-the-wealthy policy of the Reagan Administration ” the so-called “trickle-down theory.”
That trickle-down theory has been a delusion, and of little value to middle-class Americans. In the first place, the resulting reduction in tax revenues has added several trillion dollars to the national debt. And second, the middle class has not shared in the wealth created by their hard work and increasing productivity. Instead, all that wealth has gone to the already overly wealthy. The per-capita income of the top one percent of America is more than 80 times that of the lower 50 percent, and just one-tenth of one percent of our population possess as much wealth as the entire bottom half. These are the largest income and wealth inequalities since the 1920s, just before the greatest economic crisis in our history ” the Great Depression. What we need now is a downward redistribution of wealth to restore the balance of income and assets to the more favorable ratios which greatly expanded the middle class and created the amazing prosperity of the post-World War II decades.
We should adhere to the principles set forth by political economist Adam Smith in his 1776 treatise, “Wealth of Nations,” which has been referred to as the bible of capitalism. In it, he states government is essential to a civil society, and although government benefits all members of society, taxes to support it must, of necessity, be based on the ability to pay. He further points out for capitalism to succeed, the income of those who produce its goods and services must be sufficient to permit them to purchase those goods and services. In 1914, Henry Ford broke with the prevailing exploitation of labor by paying his production line workers $5 an hour when the prevailing wage at the time was half that or less. His reason? He could see the improvement in profits from the increased production which could be achieved by paying workers enough to allow them to purchase the products they were making.
One of the factors leading to the current financial crisis has been the declining real income of the middle class (for a wide variety of reasons), who are no longer able to sustain their standard of living, leading them to run up debt on their credit cards at usurious interest rates. Those who saw housing prices steadily rising while their incomes were falling farther behind, saw the prospects for homeownership slipping away. Unregulated predatory lenders and their accomplices recognized an opportunity to line their pockets with ill-gotten gains by tempting desperate people into sub-prime adjustable rate mortgages, on the supposition housing prices would continue to rise.
When housing prices stopped rising, these opportunists got caught in the same trap they had set for the borrowers, resulting in a precipitous fall in housing prices, and a failure of the debased financial institutions, which has quickly contaminated the entire system.
Cutting taxes on the wealthy is not the way to resurrect the economy. Consumer purchasing power is the driving force of our economy, so the way to restore prosperity is to put more money into the hands of the middle class, and the only way to accomplish that is by a redistribution of income to restore a fairer balance between the wealthy and the middle class.
What astounded me during this presidential campaign was the hordes of middle-class Republicans jeering whenever the words “redistribution of wealth” were mentioned.
Are they so gullible that in the heat of the political campaign they were incapable of realizing they would be the beneficiaries of that redistribution? Sort of like shooting yourself in the foot.
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