How Tax Cuts for the Rich Destroys the Economy

Like I keep sayin': poor and working-class people create all the jobs because poor and working-class people spend all their money.

David Atkins at Hullabaloo:

This Joseph Stiglitz piece in the New York Times has been making the rounds so forcefully that it almost seems redundant to relay it again here. But it's too good and too important not to use even this space to amplify it once more with feeling:

Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena, when they are in fact intertwined. Inequality stifles, restrains and holds back our growth. When even the free-market-oriented magazine The Economist argues — as it did in a special feature in October — that the magnitude and nature of the country’s inequality represent a serious threat to America, we should know that something has gone horribly wrong. And yet, after four decades of widening inequality and the greatest economic downturn since the Depression, we haven’t done anything about it.

There are four major reasons inequality is squelching our recovery. The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. While the top 1 percent of income earners took home 93 percent of the growth in incomes in 2010, the households in the middle — who are most likely to spend their incomes rather than save them and who are, in a sense, the true job creators — have lower household incomes, adjusted for inflation, than they did in 1996. The growth in the decade before the crisis was unsustainable — it was reliant on the bottom 80 percent consuming about 110 percent of their income.

Second, the hollowing out of the middle class since the 1970s, a phenomenon interrupted only briefly in the 1990s, means that they are unable to invest in their future, by educating themselves and their children and by starting or improving businesses.

Third, the weakness of the middle class is holding back tax receipts, especially because those at the top are so adroit in avoiding taxes and in getting Washington to give them tax breaks. The recent modest agreement to restore Clinton-level marginal income-tax rates for individuals making more than $400,000 and households making more than $450,000 did nothing to change this. Returns from Wall Street speculation are taxed at a far lower rate than other forms of income. Low tax receipts mean that the government cannot make the vital investments in infrastructure, education, research and health that are crucial for restoring long-term economic strength.

Fourth, inequality is associated with more frequent and more severe boom-and-bust cycles that make our economy more volatile and vulnerable. Though inequality did not directly cause the crisis, it is no coincidence that the 1920s — the last time inequality of income and wealth in the United States was so high — ended with the Great Crash and the Depression. The International Monetary Fund has noted the systematic relationship between economic instability and economic inequality, but American leaders haven’t absorbed the lesson.

 SNIP

Go read the whole thing if you haven't already. Stiglitz' argument would serve as the basis all economic policy in America if the system were just. Moreover, Stiglitz' proposed solutions are popular with the majority of voters. They're just not popular with the majority of lobbyists, wealthy campaign backers, and millionaire media cocktail party types. 

This is why the rich are parasites on the body politic.  The greater their share of national wealth and income, the weaker the economy and the harder it is to grow it.

The mark of a healthy economy that benefits everyone is not how much the richest people have; it's how many people have enough.