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Seventy percent of the US economy depends on con- sumer spending. But wealthy people, who now own more of the economy than at any time since the 1920s, spend only a small percentage of their incomes. Lower-income people, who were in trouble even before the pandemic, spend whatever they have – which has become very little. The wealthy of the 1920s didn’t know what to do with all their money, while most Americans could maintain their standard of living only by going into debt. When that debt bubble burst, the economy sunk. History is repeating itself. The typical Americans’ wages have hardly increased for decades, adjusted for inflation. Most economic gains have gone to the top exacerbated by the
recent reduction of wealthy and corporate tax rates by Republicans. The result has been consumer spending financed by borrowing, creating chronic fragility. The wealth imbalance is now more extreme than it’s been in over a century. Corporations don’t know what to do with all their cash. Trillions of dollars are sitting idle on their balance sheets.The biggest firms have been feasting off the Fed’s cor- porate welfare to finance stock buybacks. The heart of the imbalance is America’s wealthy and the corporations they own have huge bargaining power – both market power in the form of monopolies, and political power in the form of lobbyists and campaign contributions. Most workers have little or no bargaining power – neither inside their firms because of the near disappearance of labor unions, nor in politics because political parties have devolved from giant membership organizations to fundraising machines. Biden’s “stimulus” programs are fine but temporary. The most important economic reform would be to correct this structural imbalance by raising wealthy and corporate tax rates, taxing wealth not just on the average person’s home or real estate but the wealth of the super wealthy who hold most of their wealth in stocks, reducing monopoly power, strengthening unions, and get- ting big money out of politics. Until the structural imbalance is remedied, the American economy will remain perilously fragile. It will also be vulnerable to the next demagogue wielding anger and resentment as substitutes for real reform. Fascism and WWII followed the desperation of the last great depression. The Wolf is guarding the hen house and the poor hens are buying it. Most Hens aren’t too bright history has shown.
Bruce Dawson, Taylorville