Low taxes on the super-rich, the top one tenth of the top one percent especially, are the cause of all our current economic woes.
When taxes on the rich are cut, as they were in the Bush administration, the same reckless sequence ensues—bubbles in the most nonproductive areas, financial instruments and real estate, with lots of get-rich-quick chicanery, a crash, bank failures, followed by a serious recession or depression.
When the Republicans forced Clinton to cut capital gains taxes, the dot-com boom turned into the dot-com bubble. When the crash came in 2001, Bush responded by cutting taxes. The result was called a “jobless recovery.” It was considered an inexplicable mystery. It was actually a new bubble in the fiscal sector while the rest of the economy was in a recession that has never gone away.
After the crash of 2008 we kept the Bush tax cuts and added more tax cuts. We now have a boom in the fiscal sector, the banks are rolling in money, and record corporate profits. Yet the recession in the real people’s economy remains.
Money will only be redirected into productive activity by taking it from the rich—who stick it in funds and speculate in derivatives and search for the new Bernie Madoff—and putting it to work by the government.
Income inequality distorts business, economics, politics, and society itself. Money buys influence and power.
What do people with money use that power for? To protect what they have and make even more. They buy theoreticians to justify their wealth. There are actual true believers in free market theology, people who equate Social Security and Medicare with Soviet and Fascist enslavement. But their success in leading the backward march in our political thought toward the 19th century is a steady record of such people finding wealthy individuals and corporations to fund and legitimize their nonsense.
The average cost of winning a congressional election is now over a million dollars. A senate seat averages $6.5 million. That’s just the visible, recorded costs. Simply to run, let alone to win, a candidate has to have made himself palatable to the wealthy.
The Supreme Court says money is speech and can’t be restrained. General Electric’s voice is hundreds of thousands of dollars louder than yours. That’s not an accident. Right wing groups, funded by corporations and the rich, have spent years cultivating and backing pro-money lawyers and judicial candidates.
The more that wealth is concentrated, the less those individuals think they need the public schools, parks, trash collection, water, police, welfare agencies, and public health. Off they go to live in their separate, and often gated, communities, with exclusive services. Having done so, they now turn their attack on teachers, bus drivers, and sewer workers that serve the majority of us and then make the astonishing claim that such people are the cause of our financial woes and the best way to fix things is cut their benefits and take away their political power.
In free market theology and in free market dramaturgy, the rich are rich because they work harder and they’re smarter than anyone else. So they deserve every nickel! If you’re not rich, it’s because you’re lazy and undisciplined.
Jacqueline, John, and Forrest Mars, Jr. each have about $13 billion. They “earned” their wealth by coming down the birth canal of a woman married to a candy magnate. Edward Johnson III has $6.5 billion. Forbes Magazine considers his wealth “self-made,” because he rose through the ranks of Fidelity Investments before he took the helm from his father, Edward Johnson II. The Koch Brothers, listed at $25 billion each, got rich by being the sons of Fred Koch.
Many of the rich actually are self-made and did things to “earn” their money. Michael Milken is worth $2.1 billion. You may remember him as the “Junk Bond King,” head of Drexel Burnham. He was indicted on 98 counts of racketeering and securities fraud. He plea bargained, testified against others, and served two years. Drexel Burnham went bankrupt. He’s still rich.
Some rich people have done productive things to get rich. Steve Jobs, one of the co-founders, and later the savior, of Apple, was creative, visionary, and original. I’m writing this on a MacBook. However, like at least 70 percent of us, I owe my literacy to public schools. Without that public investment, where’s Apple’s market? My computer came by plane and then by truck, spewing fumes all the way, using publicly built and maintained airports, roads, and bridges.
Roughly speaking, the richer a person or company is, the more of the public sphere they use; the more they pollute and the more we have to clean up after them. We don’t have any metrics to measure that, let alone universal EZ Passes that can tick off those usages off and bill them as they go. The closest we can get—so far—is to look at gross incomes. But we are kinder and fairer than that, we only tax net incomes.
But wait, rich people are really, really fragile.
Tax them too highly, they’ll wilt. Or go on strike! Mills will grind to a halt, planes will fall from the sky, and wheat will wither in the fields as we fall into barbarism. That is, in essence, the plot of Atlas Shrugged, by Ayn Rand. Ronald Reagan complained that if he made more than a movie a year he’d get pushed into the top tax bracket, after which it wasn’t worth going to work.
Rand published Atlas Shrugged in 1957. At that point our top marginal tax rate was 91 percent. It stayed in that neighborhood until 1965. It went down to around 70 percent until 1981, when Reagan took it as low as 31 percent.
When our taxes on the rich were at their highest, growth averaged around 3.1 percent per year. Since the Reagan cuts it’s been about 1.5 percent.
Although Republicans revere Reagan second only to Jesus (if they’re Christian, ahead of Him if they’re true Libertarians), I have never heard a single one of them say, “I wish Ronnie had made more movies. If only high taxes had not disincentivized him we could have had Bedtime for Bonzo II.”
In more recent times, Bill Clinton raised taxes. Everyone prospered. Including the super-rich. Andrew Cuomo claims we shouldn’t tax the rich because it will make them flee. But he’s talking about extending a tax that’s already in place and it’s hard to argue that the ultra wealthy have only stayed because they were holding their breath waiting for Governor One-Percent to come and save them.
Tax the rich. It’s good for you, for your children, for America, and even for them.
- Dion Ogust