And the Regan Supplyside dropped tax rates down over 8 years and fueled an economic boom that lasted for about 20 years. Pure supplyside isn't the full answer, but neither is the other side of the coin. It is likely something in the middle.
The only people who received any real benefit from the past thirty years are the top 5% of households - those now making more than $300k per year. The next 10% is breaking even. If you make more than $100k per year but less than $300k, you are doing about as well as you should.
The bottom 85% of this country has gotten poorer.
The numbers are even worse when considering discretionary income. The period between the moment discretionary income went negative for the average American and the Great Recession is measured in months. Once people could no longer spend money, the economy stopped.
A clearer way of looking at it is this.
The top 5% of the population earns roughly 25% of the nation's income, but only spends about 15%.
That's 10% of this nation's income that gets hoarded to them each year, every year. If this figure is less than GDP growth, and there are no attempts at correction, then the economy eventually faces a liquidity crisis - the people who need money the most have no means of exchanging value.
There are several means by which this can be corrected.
- Taxes are the most straightforward method. Taxes negatively impact the economy based on how much the currency would otherwise be utilized - and right now, cash is not being utilized very well at all by the rich.
- Borrow money from the rich. This is only slightly less straightforward than the above. Rather than taxing them, you agree to pay them back in the future. The rich are eager to lend to the government, but that is not happening in significant quantities.
- Get the rich to invest in the economy directly. This is what is currently happening, but it is anemic compared to wide-scale solutions. It also relies heavily on a majority of them doing this at once - or at least enough to trigger sustained growth. That is not happening on significant levels, though some business leaders are trying to push for this - GE, Buffet, Gates, etc.
- Get the rich to spend more in general. The primary problem with this is that most of this wealth is not returned to the American economy. Spending millions on foreign cars and trinkets does not provide jobs here. This is one of the reasons Reagan's top tier tax cuts were so devastating - it made the rest of the world richer, but the average American is now about 15% poorer.
- Get the rich to participate in charities. This is helping, again, but it's still anemic in comparison.
I think those cover all of the methods. But suffice to say, if the wealth transfer from those methods, plus GDP growth, is less than the amount of wealth taken, the poor are going to get poorer, and the country becomes less politically stable, and is going to suffer a liquidity crisis. A failure of demand, in other words.
Communism is not the answer, of course, but 70% top tax brackets seem to be ideal, unless you want to create a point where 'no one is worth this much' and stick 95% to that.
Part of the issue is, is that what people think the rich should pay as a 'fair rate' is often exceeding that any of the middle class would be willing to pay. The middle class can and does take advantage of tax breaks and cuts and as a percentage of income tax, the wealthy does pay a far larger share than the middle class does. Why should they? The answer 'Becuase they can afford it' smacks of greed on the ones who want to take it. 'I take it because I can you YOU cannot do anything about it'
Say you have one provider, and four consumers. The consumers pay the provider for the provider's goods. If you tax the provider at 51% and the consumers at 0, the provider is earning the same as if you taxed them all at 30%.
That is a toy scenario, however. When you expand it into a macroeconomic scale, it actually gets worse - because poorer people spend their money faster, and save less, a dollar of income to them gets circulated through the economy faster than does a dollar of income to someone who will save it - or worse, sends it out of the country.
Imagine two groups.
One group - the common class - has an annual savings rate of 2%. This means that, as long as a dollar stays in that group, it gets circulated through the economy about fifty times a year on average.
The other group - the rich - has an annual savings rate of 50%. This means that money they spend gets circulated through the economy twice a year on average.
Now interconnect these two groups, and think for a moment - who is hurt more, in real income numbers, by taxing the poor group at all?
Hint: It isn't the poor. They're hurt, certainly, in meaningful and human terms. Their suffering brings -everyone- down. But in terms of actual meaningful wealth in terms of dollar income, the rich are taking that hit directly because the consumers can't spend the money on their goods.
Technically it is their money in that they -did- earn it. Just as your money is yours. Yes society, with governmental help sets the value of money, but it is accepted that your money is yours when you earn it. It does NOT belong to 'society' or the government.
If tomorrow the dollar is worthless, what good does it do me to earn it? If I refuse to respect the social contract that surrounds it - that in order to have value it must actually be used as a medium of exchange, 'use it or lose it' style, or lost - then what right do I have to complain?
This is to say nothing about the rentier class, as a rule. The payments they extract from the population - directly and indirectly - are a form of tax far more sinister than the government is. At least the government, in principle, is accountable to its citizens.
True, but the fact it's a mandate isn't neccessarily good. As it stands, it is unconstitutional because it forces people to either pay for health care or pay a fine. The person gets nailed either way if this bill goes in and I find it odd that a majority of the states ( 27 the last I heard) are now asking for an exemption to the bill. Because they cannot pay for it. It's too expensive.
The mandate is almost certainly going to go. Hopefully the health insurance industry will go with it.