America’s Future – Economic Inequality

This is a companion post to “America’s Future – Continued”. It represents my expanded thoughts about Economic Inequality, one of the core existential threats to our democracy that I outlined in that earlier post: 

Economic Inequality:  We have extreme and growing economic inequality within our electorate. The top 1% of Americans earn close to twice the earnings of the whole lower 50% combined. Even worse, that same 1% has more wealth than the total wealth of the lower 90% of Americans. The gap is continuing to grow, mostly because of unequal tax policy, which is substantially controlled by the wealthiest Americans and their business interests.

The influence over tax policy exercised by the wealthiest Americans through their political minions inevitably leads to favorable tax treatment for them while increasing the tax burden on poor and middle class working people. However, there are limits to the capacity of the working class to fund the needs of the local, state, and federal governments. The resulting unequal and unfair tax burden just cannot raise enough revenue; that ultimately starves the federal government of funds to meet basic societal needs such as public infrastructure, environmental stewardship, healthcare, education, and fundamental scientific research. Similarly, a myriad of other critical social and economic programs that keep the US competitive in the world community and meet the needs of its own citizens suffer.

But these wealthy Americans have an explanation for why they should get special tax benefits. It’s called “supply side economics”; the concept was introduced to the broader public in the 1980 Reagan presidential campaign. The idea is that investment by wealthy people is the ultimate driver that stimulates growth in the economy. So if they get preferential tax treatment they will build and spend, the entire economy will grow rapidly, tax revenues will increase, and that economic growth will “trickle down” to the working class who in the end will be the real financial beneficiaries. Even I believed that in 1980. But after trying it three times, all under Republican administrations, I can say unequivocally that it has not ever worked as advertised or intended. It does reliably produce two results you can always count on however; it substantially increases economic inequality, and it dramatically increases the national debt.

The level of economic inequality that the supply side economic strategy has created over the past 40 years manifests itself today in electoral unrest in a variety of ways that at first blush seem to be unrelated; however, racism and white supremacy, anti-immigration, xenophobia, even voter suppression efforts are all directly driven or exacerbated by the stagnation of real working class wages over the past 4 decades. The recognition of economic inequality associated with the belief that ones economic condition is limited by benefits or opportunities afforded to others less deserving is a powerful drug, especially when exploited by political opportunists. Regardless, virtually every outward expression of political discontent or rage if traced to its source has the economic condition of the working class as one of its primary roots.

Until the Reagan era limiting economic inequality was a core element of federal tax policy. It worked relatively well until it was dismantled in the 1980s and replaced with supply side economics. The implementation of that economic philosophy fostered an entire new industry of legal tax evasion strategies for the wealthy. Today, most wealthy Americans pay significantly lower tax rates than the working class, and through smart business manipulation many pay nothing.

For a long term stable society tax policy must be revised to address inequality; a much more progressive tax system must be re-implemented and include equal tax treatment of all income regardless of source. And we must reverse some of the worst inequalities that have already severely stressed the poor and middle working classes over the past 40 years. If we don’t do these things, political unrest will continue toward more progressively more extreme destructive and undemocratic ends.

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