A simple commentary on an economic point

This commentary does not discuss GINI indexes, Quantitative easing, interest rate indexes, or the Laffer curve.

It makes this simple point:

Three (of the) ways that inequality reduces the prosperity of the American people:

1. The direct issue that the wealthy are undertaxed. That money could reduce inequality, going to the rest of America by lowering their taxes and/or invested in them.

2. An economy structured for high inequality creates less wealth. There is less productivity, less innovation, less entrepreneurship, less competition.

Instead, the economy continually consolidates to bigger companies owned by fewer people, and protects their wealth and prevents competitors rather than being focused on creating wealth.

3. That lost money not spent on investments for the American people has an increasing cycle of loss.

Less spent on education means less wealth created meaning less money to spend on education and so on.

Same with infrastructure or many other programs that create wealth.

All in the name of increasing the size of the slice of the smaller pie for the few with the most.

These simple points are a reminder that inequality is far more than simply the direct amount of wealth the wealthy aren't paying in taxes - but a much larger issue.

Increasing taxes on the most wealthy has a remarkable positive effect. That's when 'trickle down' actually happens, as the people have more, spend more, and create more.

That's what would re-inflate the middle class.

FDR once supported a 100% income tax above several million dollars of income - and he was on to something.

People invest more in companies, growing them. Politics has less money smothering it from the top.

We could do nothing better as a society than to raise taxes on the rich to pre-Reagan levels.

This is a policy in the interest of Democratic, Republican and Independent voters.

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Raggedy Ann's picture

Oh, sorry, I mean Craig234.

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"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

Big Al's picture

disaster global capitalist system that allows for the obscene accumulation of wealth, mostly through financialization. Raising taxes at this point is merely a bandaid to the more urgent task of radically changing this runaway capitalist economic system to a socialist oriented system.
You're right that the issue is much larger than just getting the wealthy to pay more taxes.
Instead of taxing Wall Street transactions as some have suggested, mostly from the left, why not abolish Wall Street?

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@Big Al Well, a couple things.

One is that the ability to get changes through is correlated with the wealth they have to spend to block it - and that's an issue the higher taxes will help with.

Yes, I realize that the higher taxes are also blocked by that wealth, but it is what it is. At least it has the 'Make America Great Again' aspect of restoring something and is easy for the public.

Another is that we need to clearly differentiate the goal from some sort of communist goal - both for PR and because that's not how far I want to go.

Some financial role is productive. Historically, Wall Street has taken 10% of the economy's profits in exchange for whatever 'greasing the wheels' it does - some of which is useful.

In recent decades, that's risen drastically - apparently as high as 45% of all profits. All of that
above 10% is parasite wealth extraction - and perhaps some of the 10% was as well.

One option to consider is public finance being created; another is greatly restricting speculative
activities that are wealth-draining. I would like that 'transaction tax' also.

Over half the trades in the stock market are now automated trades by high-speed systems. That's not about creating, but extracting wealth.

Ph.D's have been taken away from useful science to create these systems. The most profitable was created by a nutjob, Robert Mercer, who was trump's biggest backer and is a right-wing activist.

Citizens can use two tools, their vote and their spending, to have some impact, and we haven't
done well at getting even those to happen. trump was elected and people buy Koch products.

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ggersh's picture

@Craig234 local banks used to be very small margin
as far as profitability.

IB's of WS have turned stock price into cash assets
hence AMZN being able to buy into any business w/out
needing to turn a profit yet closing in on being the
corp. worth a trillion$$$$....also remember this is
owned by the same guy with ties to the CIA.

You might also want to consider of how SV, technology
have played into the inequality.

BWTFDIK???

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I never knew that the term "Never Again" only pertained to
those born Jewish

"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"

Heard from Margaret Kimberley

@Craig234

I agree with much of what you say, but - 'communist goal'???!!!

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

@Ellen North Thanks and yes, I was responding to the statement about opposing global capitalism.

That phrase is broad and includes everything from advocating communism to lesser changes.

I was say we want to be clear what we're advocating, so as to not be vulnerable to attacks of advocating communism with the call for change.

The cold war is over, but there's still a broad revulsion to going too far that direction and it's not all unjustified. Look at how Bernie was absurdly, wrongly called a communist by some.

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thanatokephaloides's picture

@Craig234

The cold war is over, but there's still a broad revulsion to going too far that direction and it's not all unjustified. Look at how Bernie was absurdly, wrongly called a communist by some.

Bernie is an admitted socialist, of the "social democrat" type. In other words, he advocates for an humane socioeconomic system like the Scandinavian nations have.

Tarring him with the brush of totalitarian Leninism/Stalinism -- an INhumane socioeconomic system which is socialist in name only -- was a typical stunt by the agents of predatory capitalism who want Americans to beLIEve there's no alternative to doing things their way.

Totalitarian Leninism/Stalinism has set the global Socialist cause back centuries. Genuine socialism means that the nation's resources are to be used first and foremost to meet the needs of the People of the nation. Any system where those resources are to be used first and foremost to meet the needs of ever-expanding militarism and imperialism, whether the Soviets' between World War II and 1995 or our own (USA) today is neither socialist nor humane.

It is well worth noting that when nations adopt social-democratic style socialism, their military footprint tends to shrink, not grow. The realization that butter is usually a better choice than guns isn't lost on these nations.

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

@thanatokephaloides Right, we agree.

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If the supposed "job creators" i.e. top 1%, were really interested in getting more wealthy, they would support your ideas here. I believe the wealthy in this country want to not just be wealthy, they want to be seen as "elite". It is indeed, them against us. To them, what is the point in being fabulously wealthy if you don't get status ? There must be economic losers to acquire the status they crave, so the more the merrier.

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Steven D's picture

concise explanation of the negative effects of wealth inequality that anyone can understand. Kudos.

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"You can't just leave those who created the problem in charge of the solution."---Tyree Scott

@Steven D Thanks for the nice comment. Hopefully it can help someone who wants to make a point to people who misguidedly defend the policies of inequality.

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Steven D's picture

concise explanation of the negative effects of wealth inequality that anyone can understand. Kudos. @Craig234 I did a screen shot of your 3 points and put them on Twitter and Reddit (Way of the Bern). That's how valuable I feel your commentary is.

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"You can't just leave those who created the problem in charge of the solution."---Tyree Scott

@Steven D Made my day with the kind words.

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IowanX's picture

My career has been in local economic development (and historic preservation) and I've worked over the years in communities in IIRC 23 states, in small towns, suburbs, and in large cities. I've also been reading Naked Capitalism every day for a decade or so, and that's an education, too.

From the ground, the issue is "right-sized capitalism". It works pretty well at small scale (or it used to). NC reports there are negative consequences to Financialization, as you suggest. Monopoly and Monopsony capitalism is a recipe for "rent-seeking"--which Classical economists just plain hated. We've now made it the heart of our system, by *ignoring* our Anti-Trust law. 6 companies control TV media. One company control "Search", web browsers, and a telephone operating system. Another controls social interaction (FB). Another company controls the other half of the telephone operating system universe. One company controls online shopping, publishing, a major newspaper, and is moving into grocery. Wal-Mart controls supply chains all over the world. Ag monopolies (Monsanto, etc. have made farmers indentured servants, and avoid proper regulation. VW (which is part of what amounts to a German/European cartel cheated on emissions for years. We all know this. In short, this is not at all "right-sized capitalism".

As consumers/citizens (a word we rarely hear any more) we don't really have choices anymore: Mac/PC/or [sheesh] Linux? Comcast/Verizon/Time Warner? Android/iPhone? Kraft Foods or Nestle Foods when it comes to brands? CVS or Rite Aid? Etc., and everybody can add to the list

Taxation is obviously a great start, but in my opinion, re-engaging in Anti-Trust enforcement, coupled with tax policies that have lower taxes on "right-sized" market segments, but which apply draconian taxes on over-sized monopolies, seems like a promising approach. Americans are ready to bust shit up--and my hope is we can bust the right shit up, in productive ways.

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@IowanX

Taxation is obviously a great start, but in my opinion, re-engaging in Anti-Trust enforcement, coupled with tax policies that have lower taxes on "right-sized" market segments, but which apply draconian taxes on over-sized monopolies, seems like a promising approach. Americans are ready to bust shit up--and my hope is we can bust the right shit up, in productive ways.

Tragically, I don't think Americans are even close to being ready to bust the right stuff up.

They can't even agree what the 'swamp' is - is it Wall Street, or Hillary and her cronies?

As the New York Times political reporter said recently, "swamp" is a word that means whoever is against trump at the moment.

I think most Americans are not even engaged - and that the emotion of dissatisfaction many others have is easy for the interests to manipulate and aim at whatever they want.

The number of Americans ready to actually take on the problem is a small minority - the large number who support the far right in the name of opposing the swamp is proof of that.

People who want to fix things first have to overcome the less informed Democrats - and then others.

Until then, this will simply continue to be the people pointed at the reformers as the enemy, until they finally get so disgusted they just agree to end democracy that isn't working.

That of course is the real dream of the plutocrats - to get rid of this nagging threat to them that's a historical accident to even exist, this nonsense of a 'vote'.

They have a lot of the power that comes from defeating democracy now, but they won't be safe until it's more solidly ended or neutered - which is what the trade deals are trying to do.

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@Craig234

Actually, I suspect that many Americans are aware that both Wall Street and Hillary and her cronies are Swamp denizens, with Hillary eager to continue to act for them and many others draining America and the world in every way they can, as their political front-puppet working on the Clinton's 1st billion.

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.

thanatokephaloides's picture

@Ellen North

Actually, I suspect that many Americans are aware that both Wall Street and Hillary and her cronies are Swamp denizens,

As are Donald Trump and all his rePIG ilk!

Bad

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

thanatokephaloides's picture

@IowanX

or [sheesh] Linux?

Why "sheesh"?

Linux (and other Free/Open Source Softwares) represents the only significant attempt to break out of the very monopoly culture of which you complain. It represents free computer users coming together and creating what they want and what they can use whether Big Software wants them to or not.

No "sheesh" about it.

Upgrade from Windows -- Liberate Your Computer!

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

@thanatokephaloides I suspect the sheesh refers to the limitations of Linux - limited products ported to it, etc.

Not the idea, which is great, of an alternative to monopolistic platforms.

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thanatokephaloides's picture

@Craig234

I suspect the sheesh refers to the limitations of Linux - limited products ported to it, etc.

Not the idea, which is great, of an alternative to monopolistic platforms.

And there, of course, you confront the fact that there's always a price to be paid when one decides not to play the monopolies' way. In the case of Free/Open Source Software (FOSS), one needs to go back to original tasks and use what the FOSS world supplies to do those tasks.

It's much like grocery shopping. I used to love Stouffers' proiducts, but I won't buy them any more as they are Nestlé subsidiaries today, and I don't want to be giving financial support to Nestlé while they are still fucking California over for water.

I also am none too happy, by the way, about the abuse of Linux technology to deny admin rights to device owners, as Google's Android operating system does routinely. There's a real "sheesh" for you!

Diablo

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

Indeed, and thanks for the essay. That and living wages all around would make an enormous difference.

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Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.

A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.