WASHINGTON — President Obama is confronting mostly Republican opponents over whether to extend the Bush tax-cuts to the richest 1 percent of taxpayers. Between 1979 and 2007, the richest 1 percent received three-fifths of all the income gains in the country. Most of this went to the richest tenth of that 1 percent, people with an average income of $5.6 million — including capital gains.
So this is a no-brainer in terms of fairness: allowing the Bush tax-cuts to expire for the richest 1 percent of Americans would reverse some of the vast upward redistribution of income that has taken place since the late 1970s.
Yet a couple of caveats are in order. First, restoring these taxes for the rich and the super-rich by itself won’t do anything for this weak economy nor for the 23 million people who are unemployed, involuntarily working part time or have given up looking for work.
In fact, by itself it would have a negative impact on the economy and employment in the immediate future if the federal government didn’t use the extra revenue to increase spending.
However, in the current political climate there is much political pressure to reduce the budget deficit, especially over the next few years.
So taking back these tax cuts could help us avoid other budget cuts that will hurt people.
Or, alternatively, it could open more space for the federal government to engage in stimulus spending — which is what we need to move closer to full employment.
Of course, the federal government should be engaged in stimulus spending right now, but it is being held back by superstitious beliefs about the public debt.
In reality, we don’t have a federal debt problem: net interest payments on the federal debt are less than 1.4 percent of our national income, which is about as low as it has been for the past 65 years.
But that is not well known, and right-wing forces have been aggressive and well-financed in their attacks on federal spending. So if revenue is going to be raised, it should come from the people who have vastly increased their already too-big share of the economic pie in recent decades.
The other caveat is that we can’t reverse most of the upward redistribution of income through the tax code. As my colleague Dean Baker has persuasively argued, most of this redistribution has taken place through the rewriting of rules so that markets deliver more to the rich and less to everyone else.
A stellar example of this is the current strike by Caterpillar workers in Joliet, Ill. The big manufacturer of earth-moving equipment had record profits of $4.5 billion last year, and $1.6 billion in the first quarter of this year. Yet it is trying to force its workers to freeze their already reduced wages, and pensions for six years and pay more for their health insurance. The company has hired replacement workers and promises to shove these terms down its workers’ throats.
This kind of greed-based assault on ordinary workers would not have happened in the pre-Reagan era, before changes in labor law and practices made such ploys much easier.
It is these kinds of institutional changes that will have to be reversed if we are ever going to return to a society in which the majority of people can aspire to a middle-class existence.
Reforms such as the Employee Free Choice Act, which would restore the right of workers to join a union, will have to become law and be enforced. Workers — not just in manufacturing but throughout the economy — will have to have some bargaining power. Otherwise, the ugly and increasing concentration of income, wealth, power and political corruption that has transformed this nation over the past three decades will continue.
• Weisbrot is the co-director of the Center for Economic and Policy Research.
Comments (21)
Add commentThese are gems!
"the richest 1 percent received three-fifths of all the income gains in the country."
"allowing the Bush tax-cuts to expire for the richest 1 percent of Americans would reverse some of the vast upward redistribution of income that has taken place since the late 1970s."
1. "received"? how about EARNED;
2. "upward redistribution"? indicative of the fallacy in progressive thinking that's become the foundation of this "fair share" mantra: the notion that the economy is a pie and the different strata take a finite slice of it. It's not a pie, Mr. Weisbrot. It's limitless. Further, "redistribution" implies every taxpaying American's $$$ is pooled, owed to the govt FIRST, and then doled out. They EARNED it (see 1 above).
@NewLife: get help. @Grendel:
@NewLife: get help.
@Grendel: what makes you think the economy is limitless? Does the economy not represent capital, which is based upon natural resources, which are finite?
Grendel
I think there's a misconception here. From one of your other posts today, it sounds like you fish in southern Chatham, which leads me to believe you're a hard working guy. Hard working folks like to be compensated for their work, which is the way it should be. I grew up hauling lumber, hanging drywall and sheetrock, and installing cabinets. At the end of the day, I wanted a decent paycheck. Understandable.
This article isn't arguing against people earning a good living. It's not arguing that if you're a good plumber, or invest in quality fishing equipment, you shouldn't be able to work your butt off and earn 6 or 7 figures. What it is advocating FOR is people like you. Small business owners and start-ups. It's arguing for people, not against them.
In essence, the movement this guy represents wants to reign in cutthroat corporate executives and administrators who play chess with common peoples' lives, who intentionally manipulate markets and trade funny money all to increase their personal bank accounts at the expense of the common American. Who lobby for federal subsidies that empty the federal treasury, and weasel out of paying taxes so the treasury is not replenished. Do you really think that a corporate executive who purposefully finds his business tax loopholes, who ignores environmental regulation only to pay the EPA fine because it's cheaper, who is willing to sell out his American labor force to Bangladesh because Bangladeshis are cheaper, "earns" his 8 figure salary? The kind of people who make unlimited, anonymous campaign contributions so that Congressmen owe them favors, which often results in legislation that favors and subsidizes big business over small business "earns" his money the same way you do? Maybe you do, but I think those people are the scourge of society. Yet somehow they're heralded as patriots...
Also, another misconception: the US economy and its potential for growth is not limitless. Economies that depend upon non-renewable natural resources are finite by definition. They are not limitless. And at present, our economy is heavily dependent upon non-renewables.
@PP
you're sure "intellectual property" is a natural resource? If so, then it is finite and you can expect the Red Chinese to eclipse and pass us on sheer numbers.
The American Way is founded on the opportunity, which is 180 degrees from the progressive premise of exploitation.
@Grendel: intellectual
@Grendel: intellectual property? So, you think one can succeed simply by coming up with thoughts and using no natural resources whatsoever? Even computer memory takes up physical space somewhere. And most "intellectual property" is worthless until it's applied.
Capital breeds capital. This is a fact. The richer you are, the easier it is to make money, which certainly doesn't seem to indicate that hard work correlates with income.
Even I, a spoiled middle-class white guy, recognize that I don't "earn" all of my money. Without the infrastructure of this society, I would have no money and if I were even still alive, my life would be one of impoverished squalor.
The idea . . .
that economy was limitless was a talking point push forward back in the 70s and 80s by the likes of arthur laffer to sell supply side economics. it never had wide exceptance by economist other than those in the employ of conservative groups or wealthy special interest groups.
bakatcha 2P
you mean as corporeal bodies in a physical reality we only have so much stuff we can exploit before we're out of Schlitz?
How does your capital breeds capital argument stack up with stimulus spending? You've omitted the incentive part. Given a favorable environment capital will breed opportunity. Strip away the incentive and you'll likely find those that have it will either sit on it or go somewhere favorable.
ps -- I'll bet that "Grendel: intellectual" got some attention, as false advertising.
@Grendel: when does anyone
@Grendel: when does anyone not have an incentive to make more money?
Also, capital does not necessarily breed opportunity. Opportunity is a possible byproduct of profit, not a necessary consequence. When a small percentage of the country controls the majority of the wealth, it spells economic disaster, because producers rely on consumers, and the ultra-rich will only consume so much.
@southeastfood
I owed you an answer: Yes, I fish, and as you are aware, the notion of compensation is not so conventional in this line of work.
Trolling is actually a good model to discuss. Consider: ADF&G allocates more fish than the troll fleet can take by itself – limitless as far as I’m concerned. Yes, I know about closures, the July Chinook derby-style, etc. – the point is I COULD fish all year round somewhere in SEAK.
Should the bigger operations be fish-taxed at a higher rate just because they’ve got more capability? Absolutely not. They get the same ex-vessel I get, just more of it. And they assume a greater RISK than me, again, owing to the size of their operations. What’s more, these are the same characters that give us ham ‘n eggers a voice. I don’t expect my fair share of the fish; I expect equal access to it; but even then I assume the risk vs reward.
This is not a perfect model, so let’s not get into the politics of ADF&G, Treaty Fish, the cost in natural resources to keep the fleet working, etc. I’m addressing the go/no-go criteria, and the bigger guys are more likely to go while I stay tied to the finger because they are willing to take the risk. That, and I’m slow.
True
While it's true that the larger operations receive the same ex-vessel price as smaller operators, the assume less risk, as their resources are proportionally larger. A larger operator might lose one boat, but they would not be put out of business, whereas if a sole proprietor lost his/her vessel, it would be an enormous issue. In addition, CPUE is greater for larger operations. Lastly, larger companies in almost ANY industry receive proportionally greater benefits from government infrastructures than single operators, and in that sense, larger taxes are simply reflecting the proportionally greater benefits received.
to fromdustreturned
I lose my boat, there's 3-4 ton less salmon in the market. Some highliner out of Sitka loses his, and it's a different story. Again, not the best model, but the economy will feel it when a big producer goes down compared to the little guys. And by "going down" I simply mean has quit producing. The notion that the big operators should be crotch-kicked for their success does not sit well with the fleet. Keeping a big producer incentivized seems like sound economics. Whereas this nebulous "fair share" gibberish is just that -- unfounded, and incendiary.
PP-You are a guy? Holy
PP-You are a guy? Holy crappolla!
Yes, p's a "guy" but he's
Yes, p's a "guy" but he's still in training pants! We're trying to educate him on what America is all about. Actually it's more like de-program him. He's young and slightly innocent in the ways of the real world. Bear with us...it's not easy.
Now let's all congratulate p for getting the progressive talking point for the week included in his post - Obama would be proud!
"Without the infrastructure of this society, I would have no money and if I were even still alive, my life would be one of impoverished squalor."
Now let's continue with the class warfare talk...ick.
Please excuse my snark but it's the only way to cope sometimes.
Don't worry, Calypso. Without
Don't worry, Calypso. Without the mechanisms of society, NO ONE would have money (because it wouldn't exist) and we ALL would live in squalor (because sociality is what makes our species so successful).
And I'm pretty sure when you're involved in a war of any kind--be it a conventional, nuclear, or class war--you can't just say, "stop it! You're being mean" and expect the other side to capitulate.
Though I'm fairly certain you're at least privileged as I am.
p, you're giving
p, you're giving "infrastructure" too much credit.
What came first, the Model T or enough roads to use it on?
What came first, the telephone or the wires on poles?
What came first, the cell phone or the cell tower?
Sure it's nice to have running water into the basement while you're working on your next invention but how did those water lines get built? Money from productive citizens - taxes.
How 'bout this - do you think government could have invented and produced a water main or did a private company do that and sell it to the government?
So don't put big government too high up on the pedestal. It's not really something to be worshipped in the United States. It's something to give just enough money to in order to keep our borders safe and to protect us from enemies. They can use some of the money to build infrastructure too but remember where they got the money to do it.
I'll cheer for the private businessman every time...he's the smart one.
Colorado Springs
Hey Calypso, I know a few folks in Colorado Springs who share your tax philosophy. Care to ask how it worked out for them this year?
Grendel
Fishing is an interesting example. When managed carefully, fish can be considered a renewable resource. And for some permit holders, like trollers like yourself, salmon can be perceived to be limitless. A hard working fleet can fish within regulation and feed the state, or the whole PNW, and still have enough resource returning next year to do it all over again, year after year.
Coal and copper, old growth and oil, etc. These are non-renewable resources. The kind that don't replenish themselves year after year the way fish can when managed appropriately. Our economy is heavily dependent upon non-renewable resources like these. Rather than managing those resources in a way that provides for the use for not only your generation, but also mine and my children's would be wise. Yet somehow we are liquidating them pretty dang fast for the sake of a few greedy souls with a hunger for obscenely large bank accounts. Funny thing is, our economic policies require this behavior, as I've expressed in previous posts.
Let me pose another question. More money is being made in the US today than at any other point in history. Where is it all going? If our economy is larger than it ever has been, why is the fed in so much trouble? Could it be that heavily subsidizing industries that don't replenish the treasury isn't the best way to manage money if we're thinking with longevity?
SEfood
the subsidies aren't going to break the treasury. If they're putting that much strain on the budget deficit, then they'd be a priority. There's no single answer to the economic woes, but there are many symptoms: no comprehensive energy plan; no economic recovery plan (an agenda does not count); no coherent foreign policy. These three at least are intricately linked because we are globally dependent, globally influential, and, as the foremost consumer, the pinion to the global economy.
We are in fact a superpower. We need to quit apologizing for it and act like one, responsibly of course.
@sefood - with your thought
@sefood - with your thought process, the cave man should never have made a wheel out of stone. However, we haven't run out of rocks yet, have we?
Come on - man was put on the Earth to live. That means using the resources. You can't even imagine what future generations may invent and what type of resources they'll be needing.
I'm not getting into the hamster wheel to generate my electricity! I like using coal and gas.
The main reason America and most of the rest of the world's developed countries are running such huge deficits is overspending. Too many promises made (i.e. government workers' benefits) and now the piper has to be paid and too much money is being passed out to the non-producers - you know the ones that would rather just sit on the couch. Maybe too much has gone into "infrastructure" too - like the bridge to nowhere!
This sentence of yours is disturbing to me - " Yet somehow we are liquidating them pretty dang fast for the sake of a few greedy souls with a hunger for obscenely large bank accounts."
Mostly it's sad though that you think so little of your fellow man and only see perceived evil. What a way to go through life. And explain to all of us how you justify owning a computer, cell phone or anything else that is made from those "sacred" resources. Your angst doesn't add up.