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Thursday, November 15, 2012

Bush tax cuts for the rich: A grotesque failure.

For over ten years we have been told by our politicians that tax rates on the rich were too high. If only the government would unleash wall street, reduce the burden on "job creators" and let the markets go free that America would be awash in wealth and it's people swimming in jobs.

Instead we're awash in debt with no jobs to be found.

Well okay, we've had job some job growth.

According to the National Employment Law Project, 60% of the job losses in 2008 were middle income jobs in construction, office management and manufacturing, most of these types of jobs have not come back to pre-recession levels. Taking the place of those are low wage jobs that make up 58% of the jobs created in the recovery. Those jobs include retail sales, food preparation, home health and customer service.

Low wage industries overall generated 1.7 million jobs since 2010, around 43% of the total employment growth in the U.S. Middle income industries only contributed 22% of employment growth in the same time period.

How's that trickle down working out for you?

There's more: According to SimplyHired.com the nations top three employers were the Air Force, Taco Bell, and the Army National Guard.


So while we've had some job growth with our insanely low tax rates on the wealthy, most of those involve  workers saying the phrase, "Do you want fries with that?"

It's not only the prevalence of low skill, low income jobs that is the problem, but it's stagnant Income for middle class families. You know the people who still have middle income jobs, well they are earning less than they used to since the 1970's. Remember how the Bush tax cuts we're supposed to trickle down to the workers? Instead Median household income has only grew at a modest 1.6% between 2001 and 2007 (The Bush tax cuts were passed in 2001 and 2003) and then fell 4% during the recession.

Ouch.

Yet the wealthy have done awesome over the last ten years, and even after the financial meltdown that sent our economy reeling. 93% of the income gains in the first year of the recovery went to the top 1%.

Even before the recovery the Bush tax cuts helped to increase the after tax income for the top 1% of taxpayers by 74% between 1996 and 2006, and the top 0.1% saw their income double in that time period.



Now let's go to the debt aspect of the Bush Tax cuts for the rich.

Over the last decade the Bush tax cuts have added a trillion dollars to the deficit. How is it that a party that screams about deficits and cutting costs and talks a big game about not leaving debt to future generations can justify giving away so much money to the already very wealthy?

Well they can't.

They have to wrap it up in a lie, a slogan.

That's where we get the term "job creators" from. But the term itself is incredibly disingenuous as it's consumers that are the engines of job creation. Billionaire entrepreneur and venture capitalist Nick Hanauer says its best: 

"jobs are the consequence of the feedback loop between customers and businesses. For this reason, it is middle-class consumers and the demand they create that are our true job creators, not rich business-people."

I love that guy.

He also makes a great point when he says that,

"Capitalists are idea creators, not job creators."

The logic to what Hanauer says is that regular people come up with ideas, while wealthy corporations don't have to, because they have already established themselves with a previous idea. So why are we not incentivizing people to come up with new ideas but instead giving more and more money to those who are already wealthy and have no incentive to innovate other than to cut costs?

Crony capitalism.

A great example of this is the fossil fuel industry. There is little innovation there but they make billions of dollars each quarter as well as being subsidized by the taxpayers to the tune of billions a year. Yet fossil fuels are still roughly the same technology as they used a hundred years ago. Sure refineries are made more efficient with newer technology but the premise is the same, you burn it and it makes power.

Back to the issue of tax cuts.

A recent study from the Congressional Research Service that came out in September found that tax cuts for high earners is linked to income inequality, yet have no significant relationship with investment and that the correlation between economic growth and the top tax rates is not strong.

Well what about GDP growth?


"The top marginal tax rate in the 1950s was over 90%, and the real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the top marginal tax rate was 35% while the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less
than 1%."


FAIL!

So let's recap, lower tax rates on the wealthy have led to stagnant wages for the middle class, an increase in income inequality, less jobs, less GDP growth, increased debt and a decrease in middle class jobs.

What an unmitigated disaster these tax cuts have been.

Yet the Republican party continues to insist that the wealthy should not have their tax rates increased as part of the coming fiscal cliff deal. What a brazen display of disregarding the facts all so they can make themselves and their corporate donors even more rich at the expense of everyone else


We need to end this grotesque failure for the American people and pressure our politicians to do what's right.

Tax the rich.

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