Time to Put People First, Part 2

(This was reposted by Dog Gone - thanks DG - on my behalf) - Penigma

by Penigma...

Since 1981, incomes for the upper 5% of the nation have quadrupled.

Since 1975, incomes for the middle class have NOT been part of the "rising tide lifting all boats". They've either fallen slightly, or risen slightly, or even fallen sharply, depending upon how you measure.

Productivity has increased 50 PERCENT!

Increased production and a highly cash-rich upper class could have, should have led to a 'trickle' down, according to supply-side economic theory.

So, why didn't the incomes of the middle-class go up?

We have larger homes, but our parents had color TV's and refrigeration, new labor saving appliances, standard vacations and pensions, Social Security and cars, and there were more single income families. We are now in the computer age, but our parents got jet travel, interstate highway systems, nuclear power, and went to the moon winning the 'space race'.

The real measurement of the success of economic theory and taxation philosophy HAS to be income. It must include leisure time / total time worked to achieve that income, to have any fair measurement of the 'good jobs' we were all promised by the trickle down economic theory and tax philosophy.

Some statistics from the 1950's tell the story (courtesy www.thepeoplehistory.com/1950s.html

If you have $100 Converted from 1950 to 2005 it would be equivalent to $835.41 today
In 1950 a new house cost $8,450.00 and by 1959 was $12,400.00
In 1950 the average income per year was $3,210.00 and by 1959 was $5,010.00
In 1950 a gallon of gas was 18 cents and by 1959 was 25 cents
In 1950 the average cost of new car was $1,510.00 and by 1959 was $2,200.00

What this means is that since 1950 we've seen roughly 830% inflation, an 8 fold increase, in the value of dollars. Average income in 2005 is more than 8 times the 3200, but less than 8 times 5,000.00 (average income is $28k - roughly).

The average car costs $27,700 now, MUCH more than eight times the $1,500 it cost in 1950, and much more than eight times $2,200. Meaning, while we have more cars, they also consume far more of our incomes. It isn't that cars are cheaper, and much more affordable; anything but.

The same for homes, the average house is WAY over $70,000 (8 times $8450). By 2005, a new home cost $180k. So it's not that housing is cheaper, it is that we spend far more of our income, go far deeper into debt. Yes, homes are larger, but we also borrow far more. I don't believe it is the people are less or more responsible, people borrow what they can and are generally allowed to borrow, but an income of $5010 wouldn't allowed someone to buy a $25,000 house in 1959, yet an income of $40,000 in 2005 DID somehow qualifiy someone to buy a home of $180k.

The simple answer is this, money at the top end was happy enough to lend, and earn interest on loans which 45 years earlier would never have been written. The speculation was driven by ever increasing expectations of return.

Accumulation of wealth at the top-end drove changes in lending practices and encouraged and supported the movement of money upward through bigger houses and bigger loans. We don't LIVE better, we BORROW more and the wealthiest are damned glad of it. That doesn't make them evil, far from it, it makes them human. They want to accumulate wealth like all of the rest of us.

But it does do one other thing, it explodes the myth that they are ready and happy to give it out as pay to US workers in US factories if they simply get to keep more of it.

If they get to keep more of profits then they WANT TO KEEP MORE OF PROFITS. They want to employ cheap labor overseas while getting US workers to borrow more so that they can again KEEP MORE of the overall wealth. It's frankly just that simple. We do not live better today, we have bigger homes and another car, but our fathers and grandfathers had better overall incomes (against costs) than we do, despite the fact that we're more productive AND that taxes are at their lowest in 60 years.

In fact, since 1981, we've changed the way we measure unemployment, no longer counting those who simply give up looking, but who are still unemployed. If we had measured that as we had during the 1970's, a time when many conservatives complain about high unemployment, high inflation and interest rates, our unemployment figures in the middle 80's - and now - would be STARKLY higher. We might be at 15% unemployment right now, certainly we'd be at 12%. This despite having a decade of perpetual tax cuts, including even steeper tax cuts for the uber-rich and on capital gains. The vast majority of dollars areno longer paid in taxes going to that same upper 5%.

What we HAVE seen, however, is that same 5%, when they DO invest, invest off-shore, building factories and creating 'jobs' in places where they can obtain effective slave wage rates. They HAVE invested in highly speculative things like the default swap bond market. They HAVE sought to bring down barriers like Glass-Steagal. We have seen the effects, high energy prices due to spot market speculators, huge profits by oil and drug companies, but not vast numbers of new jobs in the US.

It has been US wealth building factories in China or India, and US consumption of the "discount produced but still sold at a premium products" filling the accounts of the new uber-rich elite, the new Carnegies and Hearsts. We have seen this slowly, inexorably weaken the middle class. We have seen college become a cost so steep that most parents will never pay off the debt. We have seen union pay go the way of the dinosaur, benefits become mocked by calling companies who provide them things like "Generous Motors" - though their Japanese counter-parts provide similar benefits. This exposure to free or nearly free labor has destroyed our economy and our ability to pay for government. All of the supposed investment in factories on-shore, never materialized.

No, the only real period of investment in the US was the middle-90's, when the Internet/Silicon Valley boom reinvigorated the labor pool, with higher technology sector wages driving up wages nation-wide. And you know what happened??? That investment also resulted in more tax revenue, higher property values, and federal budget surplus.

Investment on-shore wasn't dependent upon upward "gifting", nor did it rely upon the unbelievably asinine idea that people's nature is to give money away once they've acquired it. It simply rested upon what has always been true. When consumer spending increases the economy does MUCH better and THAT spending relied upon people, investors, municipalities etc.. deciding that a sector of the economy really could provide sustainable growth and jobs. To do that, there had to be a belief that DEMAND not supply, would exist. Building supply without demand is the province of fools, and no one does it, nor did anyone during the 80's or the 90's. There also was more than enough money to create those jobs, despite large tax increases by GHW Bush and Clinton.

The upshot of all of this is, is that tax cuts aren't "job creators" any more than tax increases are "job killers." Companies seek out skilled labor at the cheapest possible cost. Normally areas with low taxes have historically also had low amounts of skilled labor, because their educational systems and infrastructure were substandard.

If we want to see our nation do well, we must accept that we cannot simply shift all of the wealth upward. It does NOT trickle down, it does not create supply - simply for that supply to go un-purchased. It does not create production unless there is a real market, and it surely doesn't do so if veritable slave labor can be found elsewhere.

We have engaged on a 30 year race to the bottom since 1981, reducing the value of labor, killing off benefits, jobs, arts programs, schools, virtually everything that a well-invigorated labor sector used to support.

We can continue to put capitalism first, but if we do, we will be putting people last.

We can continue to put the wealthiest of us ahead of the interests of the country and a sustainable democracy, and we will continue to see flat wages and rising costs AND declining standards of living.

We must, we HAVE to recognize that lowering taxes didn't work, nor did giving the money to people who only took it offshore, instead we must put the interest of the average American first and we must require business to invest on shore, and in our own people rather than those they can pay $5/day. To do otherwise is to kill the now sickly golden goose, to do otherwise is to abandon our country, to say the hell with patriotism, it is ME first, last and always.