Where the money went: a metaphorical representation of the economic effects of “offshoring” trillions in assets.
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Meanwhile, corporate profits are at an all-time high, taxes on the ultra-rich (and particularly capital gains taxes) have been falling since 1981, CEOs make 331 (in some cases well over 1,000) times as much as their average employees, and the top one percent now owns at least 35.4 percent of the country’s net wealth (in which net wealth = assets - liabilities), a rate that surpasses that found in most banana republics.
Of course, there is no coincidence at all. Deregulation and tax policies have been methodically crafted so as to effect precisely the transfer of wealth that has made these conditions possible. And as the chart below shows, there are now two different tax-cut proposals under consideration in Washington, both of which confer still more wealth upon the rich, although the specifics differ.
Democratic and Republican tax-cut proposals: Cut taxes
on the richest a little ... or a lot?
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An economic theory has been proffered for the further enrichment of the rich: Trickle-down economics posits that if you give the rich more money, they will reinvest it to create jobs, thereby expanding the economy and making everyone richer in the long run. However, this form of “voodoo economics,” as George Bush, Sr., called it in a moment of candor while running against Ronald Reagan in the 1980 Republican primary, has now been given a 30-year test, and it has failed America.
The trouble with trickle-down theory is that it is fundamentally based on a myth. The catch? The rich don’t, after all, spend or invest the money they gain from tax breaks and deregulation; they save it — or, to be less charitable, they hoard it. Right-wing economists have fooled us into believing that, as white-collar felon Ivan Boesky famously remarked, “Greed is healthy.” This assumes investment rather than hoarding, though, and that investors will behave with a level of ethical decency that has been wanting and pay employees enough to sustain themselves and their families; neither of these assumptions takes account of the fact that greedy people tend to be greedy: They keep the wealth to themselves. Thus, quite apart from any moral considerations, trickle-down theory fails the logic test.
But if the rich are keeping the money their pet congressmen are showering on them, fewer assets are available to the rest of the economy, and this has real consequences. Losing wealth while in poverty doesn’t mean not being able to buy a new SUV. It means not being able to pay the rent and the bills and cover any unexpected costs, as for health care. It means worse housing, more exposure to pollution that harms bodies and minds, more proximity to crime and violence, worse schools and test scores, more stress, increased divorce rates and, ultimately, shorter lives.
If we’re really serious about stimulating our economy, then the balance of wealth must be restored. Those who have pulled away from the rest of us must contribute more to the country that made them the plutocrats they are, and a rebate should go to those whom three decades of trickle-down policies have injured: the working and middle classes, who actually will spend the money.