
The ‘trickle down’ spin
Also known as supply-side economics, this was the Reaganera notion that tax breaks to the wealthy and businesses eventually result in a greater Gross Domestic Product, which is good for everyone.
The problem is that it didn’t work. Most tax breaks for the wealthy remained unspent or uninvested. The average American earning more than $150,000 spends less than 80 percent of that income, compared to 94 percent for a poor American and 86 percent for a middle-class American, according to a recent study by Moody’s. Every time the wealthy get a tax break, they save it.
Compared to the middle classes, who tend to use tax breaks to pay off debt at higher rates; or the poor, who spend nearly every dime that flows through their hands, supply-side based tax breaks clearly don’t do what proponents want us to believe.
Supply-side had been tried before. In the 1890s, it was called, somewhat earthily, “horse and sparrow economics,” from the notion that, if you feed the horses enough oats, there is eventually something left over in the road for the sparrows.
This was an economic period defined chiefly by the robber barons and the great panic of 1896, and the attempted suppression of labor unions across the country. The problem was that the wealth simply wasn’t “trickling down.” The more money the wealthy were able to keep, they kept to enrich themselves and their families.
When it was tried again, in the 1980s, it was coupled with a compression of tax brackets that had the effect of making the wealthy, middle class and poor pay much closer to the same tax rate than they previously had. What followed were boom-and-bust cycles in many key economic sectors that not only affected the stock market, but also Main Street concerns such as the housing market.
At the same time, salaries and other benefits skyrocketed for executives. By 2005, the average U.S. CEO earned 262 times what the average worker in his firm earned — more in a single work day than the average worker earned all year.
Since 2005, the wage disparity has only escalated. In the Fortune 500, that ratio has grown to an average of 375 times the average salary within a company. The CEO of Walmart makes his average worker’s annual income once every hour.
The real question is, how is it that corporations, lobbyists for corporations and the wealthy CEOs who run them managed to convince so many middle-class Americans that giving them the lion’s share of America’s tax cuts is a good idea?
That’s where spin comes in. It is done with a judicious use of language.
The term “tax relief” is a case in point.
“Tax relief” sounds great. It conjures up images of middleclass people struggling to make ends meet to pay “Washington” (politicians don’t call it “the government,” which has, among the negative connotations, images of national parks and firefighters and soldiers which are universally thought to be good things).
However, if people were told the truth — which is that 40 percent of tax relief goes to 1 percent of Americans (those making $500,000 or more) — they might see it for what it truly is: a wealth redistribution to the wealthiest Americans who can best afford to pay more, not less, in tax.
If you aren’t in favor of “tax relief” for all, however, you might just be a “socialist.” Many GOP senators and congressmen who should know better are bandying this term around with some abandon.
That’s not surprising; accusing union organizers and other supporters of labor movements of socialism — or communism — is a time-honored pastime. In the 1940s and ’50s, it was a good way to discredit a union, and some labor leaders were even summoned before the House to account for “socialist” activities at the height of the McCarthy era.
Where’s the shared sacrifice?
Congress pushed through the sequester in an attempt to force a bipartisan discussion on reducing the public debt in 2011.
The goal — to achieve a united attempt to decrease the national debt and reduce the deficit — didn’t work, and likely was never intended to by the GOP.
It was widely held that the cuts were going to be too painful for Congress to stand by idly and allow them to take effect; yet stand by they did.
However, when the cuts became painful for members of Congress, they pushed through exemptions — for defense workers, air traffic controllers, congressional salaries — making it that much less likely they would be willing to work to reverse the exemptions for little people suffering cuts to unemployment benefits, public housing, fuel oil supports, Head Start and block grants to states that do, in fact, “trickle down” to municipalities to blunt ruinous property tax increases.
Who suffers in the end? Those who must rely on public services.
A strong show of public support for public unions in Maine and other states in the last few years may be one telling sign that the middle class is finally getting the message that they are being marginalized by candidates and lawmakers who stand up only for those who have money.
Romney’s “47 percent” debacle — he apparently forgot that dishwashers and cooks and waiters are likely to be part of the “47 percent” — may have cost him the election in 2012.
The pendulum may be swinging back toward an era when middle-class Americans realize they must hang together or, in the words of Benjamin Franklin, “assuredly hang separately.”
The middle class has the power — and the numbers — to change the course of the economic malaise the country is in. But only if we realize that our best hope lies in standing up for things that are in our collective best interest and insisting that those we elect meet our expectations.
GINA HAMILTON, of Bath, is editor of the New Maine Times. She welcomes emails at [email protected].
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