The Pew Research Center has just published the results of a study indicating that the rich have gotten richer since 2007 and the poor have gotten poorer (Pew Research Study). The lowest 93% of individuals by net worth are worse off now than they were when the recession started, while the richest 7% increased their wealth by about 21%. In the comments sections of articles that I've read on the subject, most of the rhetoric was aimed at the Republican party and their scheme to lower taxes only for the rich. As a matter of fact, the problem is with the relationship between the rich and the government, but taxes aren't the main issue here.
Taxes hurt everyone, especially the poor. Raising taxes will not help poor people any more than it would help the rich. Yes, the rich would get less rich, but what guarantee do disenfranchised Americans get from the government that this tax money will be returned to them? The answer is that they don't, and history is a testament to the fact that governments generally squander most of the tax money they receive due to corruption and incompetence.
If the rich have money, they will spend it on things, just like everyone else. They will typically give the money to someone who is productive in return for some product or service, who will in turn do the same with the money, and so on. In this way you're rewarded if you are productive in some way. In the taxation way, you are punished for being productive, and the money disappears into the government black hole with a one way sucking sound, never to be seen again. The poorest never saw any of that money that was promised to them by the politicians who raised the taxes for that purpose. Taxes have increased for the rich and social welfare programs have seen increased funding for several decades now, but somehow it hasn't resulted in a reduction in poverty or wealth equality.
The really big problem, however, is in the relationship that rich people have with the Federal Reserve and other centralized economic meddling by the U.S. Government. The Federal Reserve's inflationary policies were what caused the housing bubble in the first place, giving essentially free loans to investors who bought extremely risky assets (real estate, stocks, bonds,credit default swaps and other derivative financial instruments) with the money. When people realized what was going on and stopped buying these now-overpriced houses, stocks, bonds and derivatives, the market crashed and many investors lost a lot of what they had borrowed to buy those assets. But the Federal Government decided that larger entities, like the banks that made the risky home loans, should be bailed out and reimbursed for their losses that they caused , while smaller investors were told to take a long walk off a short pier. In addition, the government decided that not only was their inflationary policy not the cause of the problem, but that we needed more of it.
So since the Fed was handing out free dollars this whole time, and all the time giving more, why didn't everyone get richer? There's more dollars, so they should be easier to come by, right? Well, the theory was that if you gave the banks money to make loans with, they would in turn give cheap loans to companies and individuals, who could then use the money to do something productive with, thus stimulating the economy as a whole. The problem with this is that the banks didn't loan the money out, because they now realized that it would be moronic to again give loans to people who couldn't afford them for things they wouldn't use to be productive with (and therefore would have no means to pay the loans back, because their salaries wouldn't cover it). Instead, they took the money and invested it back into the stock market and pumped up stock prices. Not only that, but they did the same thing to commodities, houses, and more. Because the markets went up, those investments made the banks and other investors money, and these rich guys all got richer.
Where did that leave the rest of us then? It left us with higher prices for things like gasoline, home heat, electricity, food, housing prices and rents, college tuition, medical bills and more. The biggest part of the problem with all of this is that the Federal Reserve's liquidity never reached its intended destination, and wages never went up, and in the most recent recession, have actually gone down. People have less money and have to pay more to live.
This doesn't sound like a great formula for stimulating the economy to me, and it perfectly explains why we've seen a period of increased income inequality over the 70 years or so since our peak in the 50s and early 60s. Inflationary monetary policy, social welfare programs, increased (unnecessary) regulation and higher taxes are what is driving this death spiral that the U.S. economy has found itself in.
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