Uncommon Sense

May 20, 2010

The Middle Class Pays, The Wealthy Play

Filed under: Politics — Steve Ruis @ 8:31 am
Tags: , ,

According to conservative commenters, advocating raising taxes on the rich is “class warfare” and that it is counterproductive because it is just those wealthy people, and the captains of industry, who create jobs. Is this a good argument? You can’t answer this question without looking at the situation in more detail.

For example, early in George W. Bush’s administration, Mr. Bush pushed through significant tax cuts for both the wealthy and for corporations. According to the dogma outlined above, this was supposed to have lead to growth in the economy and increased tax receipts for the government. Let’s see . . . the federal government collected $1.004 trillion in income taxes from individuals in the fiscal year 2000, the last full year of President Clinton’s administration. Three years later, after the Bush tax cuts were implemented, it collected $794 billion in income tax receipts (2003). So, the immediate effect is completely the opposite. That lost $200+ billion was roughly equivalent to the “budget deficit” of that year. Humm, this is starting to sound like a scam, no?

The argument that it is the wealthy who create the jobs is hard to support, too. I suspect because it isn’t true or is no longer. The normal argument goes like this: wealthy people invest their capital in stocks and bonds and that money is used by businesses to expand and grow and innovate. For the use of their money, the wealthy get a handsome return on investment. Except, we now see what Wall Street was doing with the money they were supposed to funnel to business. They created paper “securities” that represented nothing of real value and set up a casino operation causing the financial sector to swell to being the biggest segment of the economy. This money was not invested in businesses, did not create jobs, did not grow the economy. Then, of course, they crashed the entire financial sector, and lost millions of middle class people’s investments as collateral damage.

The “captains of industry” are taking that wealth and moving our jobs overseas because that is more cost effective and offers a great return on investment for the shareholders. Then they advocate more focus on selling internationally because “that is where the customers are.” Of course that’s where the customers are, they have our jobs, they are earning our pay, they can afford it!

How is it that the “wealthy” have accumulated an ever increasing to the point of being obscene fraction of the entire countries wealth while “creating jobs, growing the economy, . . . , etc.” How come they have so much money, an all-time high percent of total wealth in this country, when they are supposedly spending it to “create jobs?” They can “spend it and have it, too?” Why are we underwriting the wealthy just getting wealthier and wealthier while doing almost nothing for the economic health of the country as a whole?

It is past time to roll back the clock to a time when the rich were taxed more. If we were to roll back the tax codes to the time of Ronald Reagan, hardly an enemy of the rich, much of the budget deficit would disappear, the national debt would stop growing, and we would have the opportunity to pay down some of that debt, before the bill gets submitted to the middle class in crisis mode when the entire economic house of cards tumbles down.

Even Warren Buffett, one of the richest men in America, is advocating higher taxes for the rich. He asks how it can be fair, how it can be right, that he pays a smaller fraction of his income on taxes than do his employees (and this without exotic tax reduction strategies employed by many).

“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” Warren Buffett

How’s this for an argument. Raise the real incomes of middle class people and we can afford to buy more of what American companies are selling. This argument was espoused by Henry Ford, of all people, and the implementation of that idea as a strategy lead to the most dynamic economic boom in the history of the country, the 1960’s.

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