Robert Reich: Why Inequality is the Real Cause of Our Ongoing Terrible Economy

[highplainsdem]

http://robertreich.org/post/9789891366

This is one of his longer blog posts, and a very important one, well worth reading in its entirety:

THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.

-snip-

During periods when the very rich took home a larger proportion — as between 1918 and 1933, and in the Great Regression from 1981 to the present day — growth slowed, median wages stagnated and we suffered giant downturns. It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.

-snip-

Some say the regressive lurch occurred because Americans lost confidence in government. But this argument has cause and effect backward. The tax revolts that thundered across America starting in the late 1970s were not so much ideological revolts against government — Americans still wanted all the government services they had before, and then some — as against paying more taxes on incomes that had stagnated. Inevitably, government services deteriorated and government deficits exploded, confirming the public’s growing cynicism about government’s doing anything right.

Some say we couldn’t have reversed the consequences of globalization and technological change. Yet the experiences of other nations, like Germany, suggest otherwise. Germany has grown faster than the United States for the last 15 years, and the gains have been more widely spread. While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970. And although in the last months Germany has been hit by the debt crisis of its neighbors, its unemployment is still below where it was when the financial crisis started in 2007.

-snip-

[highplainsdem]

1. kick

[On the Road]

2. There is So Much Pentup Demand at the Bottom

Most people in my neighborhood are living day to day. Unemployment and low wages have driven them into basic survival mode. Any money they receive they receive is going to go immediately into the economy.

The simplest way to address it IMO is a 50-75% increase in the minimum wage effective immediately or as soon as it is practical.

[Vattel]

4. I wonder, though, how much of that extra money would

be used to reduce debt. Is paying off debt good for the economy? I'm not an economist; so I genuinely have no idea. I do know that any extra money I get goes right into paying down those damn credit cards.

[swilton]

3. K&R

[hifiguy]

5. Even by Reich's high standards, this is

an exceptionally fine analysis and well worth reading.

Kickety rec! :kick:

[hfojvt]

6. does he point out how Obama's jobs proposal adds to it?

$2,000 to those in the top 20% and $120 to those in the bottom.

Not including, of course, the parts of the $2,000 that trickle down.

[Kat45]

7. Good piece. I posted it on my Facebook page.

I've noticed that a number of people read the political articles I put up. And except for one RW former co-worker, they all like them, and some even re-post them on their pages.