Trickle-up economics

0
Jose Manuel Suarez/Wikimedia Commons

We are facing two national emergencies: rampant economic inequality and a looming environmental Armageddon. Events in France indicate the need to deal with both crises simultaneously.

Last November, massive “yellow vest” protests broke out in Paris after President Emmanuel Macron increased fuel taxes in the name of combating climate change. Trump claimed the unrest proved he was correct when he abandoned the Paris Climate Agreement.

The French protesters have multiple demands involving many issues. They are supported by both leftists and the far right, and their demands can contradict each other. There is also anger that Macron is cutting taxes on the wealthy, reducing employment and investment in the public sector, and curtailing labor protections and benefits.

In the United States, Center for American Progress President Neera Tanden wondered on Twitter, “why any progressive is cheering French protesters who are amassing against a carbon tax.” The Democratic Socialists of America tweeted back that she was defending “regressive taxes that don’t make the rich and fossil fuel companies pay their fair share.”

Increasingly, people are talking about a Green New Deal, which would be an economic stimulus program addressing both national emergencies of climate change and economic inequality. Many conservatives would deny that either of the emergencies exists. And many progressives who live in affluent communities may not appreciate how much economic inequality is an emergency.

Consider some unnerving statistics.

Nearly 80 percent of full-time workers say they live paycheck to paycheck, according to a report by Career Builder. Some 50.8 million American households (or 43 percent) can’t afford basic living expenses, according to a recent report by the nonprofit United Way Alice Project. This comes from an analysis of U.S. government data using standardized measurements to calculate the “bare bones” household budget for housing, food, transportation, child care, health care and a monthly smartphone bill.

Since the 2008 Wall Street crash, the top 1 percent has grabbed 46 percent of all new income. We now have more income and wealth inequality than at any time since the 1920s.

Trump keeps insisting the economy is “absolutely booming” and we’ve never had it so good since he became president. Meanwhile, many in the financial world are predicting a recession in the near future. Richard Wolff, emeritus professor of economics at University of Massachusetts Amherst, observes that “the capitalist system has a downturn every four to seven years. It’s had that for centuries. And the last big downturn was 2008 and ’09.”

However, the situation is more disturbing now. Wolff says, “we’ve had an economy that never really escaped the crash of 2008. In a way, the last 10 years have been an economy on life support: vast amounts of money pumped into the economy; record drops in interest rates, inviting everybody — business, individuals, governments — to borrow money; a debt-sustained situation. And after a while, you can’t mount up the debt on the basis of an economy that hasn’t really gotten going. And we’re seeing the eventual break.”

Wolff says we get out of this mess by abandoning the “trickle-down economics” of the last several decades. The government helps out the people at the top and the rest of us get trickled on.

The Green New Deal is trickle-up economics where we will have socially useful jobs with good pay and benefits. Who will pay for it? On 60 Minutes on Jan. 6, Anderson Cooper asked this question of the newly elected Congresswoman Alexandria Ocasio-Cortez. She replied that people who have an annual income over $10 million should pay a 70 percent tax rate (from the current 37 percent). Cooper thought this was somewhat wild and crazy. This caused a huge uproar by Republicans and too many Democrats. She was treated as a foolish young thing.

Los Angeles Times business columnist Mike Hiltzik wrote a detailed piece explaining that Ocasio-Cortez understands economics much better than many of the conservatives.

He says that her proposal is somewhat conservative:

“The top marginal rate in the U.S. was 70 percent from 1965 to 1981, a period that covers the presidencies of Lyndon Johnson, Richard Nixon, Gerald Ford, and Jimmy Carter, and for most of that period that rate was applied to incomes starting at about $200,000; that much income in 1974 is the equivalent of nearly $1.1 million today.

“Going just a bit further back, the top rate was 91 percent from 1946 to 1963 (the Truman, Eisenhower and Kennedy years), applied to incomes of $400,000 or more. That income in 1956 would be the equivalent of $3.8 million today.”

Those years were considered American capitalism’s golden years with a vibrant middle class. Then taxes for the rich started to fall sharply under Ronald Reagan. The wealthy have become spoiled and need some tough love. We have a lot of work to do.

This opinion column does not necessarily reflect the views of Boulder Weekly.