How's That Trickle-Down Thing Working?
This past week, President Obama cut a deal with Republican leaders whereby unemployment benefits will be extended for another year to people whose benefits were due to run out, in exchange for a two-year extension of the Bush tax cuts for the top 2 percent of wage earners in America.
Think about that for just a minute.
After all the sanctimonious outrage professed by Republicans during the midterm elections over deficit spending, the only way the Republicans would allow money to go to the Americans who need it the most for one year is to extend a tax break for the Americans who need it the least for two years.
Republicans, who refused to consider extending the unemployment benefits past the end of the year without a way to pay for them, were willing to expand the deficit in return for an uncompensated tax cut extension for the wealthiest 2 percent of Americans.
It seems hypocritical - and it is - but it is in perfect keeping with the "trickle-down" theory of economics championed by Repub-licans; and it says everything about who they truly represent.
Rand Paul summed up the trickle-down approach recently by explaining: "The thing is that we're all interconnected; there are no rich, there are no poor, there are no middle class. ... We all either work for rich people or we sell stuff to rich people."
One wonders how "interconnected" the 17 percent of his Kentucky constituents living below the poverty level are feeling right about now.
The truth is that while there is increasing poverty and a shrinking middle class, the rich are doing just fine. In 2009, the percentage of people living below the poverty line reached its highest level in 11 years. And the median household income fell 3.6 percent from 2008 levels, but the number of households worth over $1 million increased 16 percent.
While it's true that some of us work for or sell to the rich (those of us who don't serve in the military or work in the public sector or work for small business owners who are not necessarily rich), it's just as true that the rich generally get that way by selling to or servicing the rest of us.
Wealth doesn't just trickle down, it wicks. Over the past nine years, there's been an awful lot of wicking and precious little trickling. The stock market has almost doubled from its low on March 6, 2009. Meanwhile, the percentage of people living below the poverty line is up dramatically, and unemployment is stuck perilously close to 10 percent.
Wealth is going up. It is not trickling down. This is not an aberration caused by the recession. The number of people living in poverty increased in all but one year since the Bush tax cuts even before the recession - from around 34 million in 2001 to about 38 million in 2008.
Don't expect a wave of benevolence from small business owners in the wake of the two-year extension of tax cuts for the wealthiest Americans. As stated in an article in Business Week in September, "Give the wealthiest Americans a tax cut, and history suggests they will save the money rather than spend it."
It points out that the rich saved more after the Bush tax cuts of 2001 and 2003 and less when taxes were raised under Clinton.
Hiring will be determined much more by the number of customers coming through the doors than freedom from concern over a relatively small increase in taxes.
The rich managed to stay rich and the economy expanded when the highest bracket was 91 percent or higher from 1951 to 1963. The economy boomed when the rate was at 39 percent in the 1990s.
The way to improve the economy and address the deficit is to revive the prospects of the real engine of growth, middle- and working-class Americans.
Kevin Smith lives in Aberdeen. Contact him at firstname.lastname@example.org.
More like this story