Some people toss terms like snowballs – terms such as “socialism” and names of political parties, etc. I’m not a member of the latter or an advocate of the former, per se. But it’s a shame that misinformation and angry rhetoric make reasoned debate impossible.
Start with taxation. Income taxes are marginal – that is, only the income between amount x and amount y is taxable at a certain rate z. That income above $374,000 a year is today subject to the top rate. The top 1 percent of income earners in the U.S. paid an average federal tax rate of 19 percent in 2007 (2008 data are not yet available). The top 5 percent paid an average of less than 18 percent.
There cannot have been much “socialism” around lately if U.S. corporations were able to amass more than $1.8 trillion – a mountain – in cash. That’s a lot of Ford trucks.
A few years ago, Sweden suffered what would today seem to us a minor economic setback. Its socialistic system quickly righted the ship, and now that country faces far fewer challenges than we do. Norway displays extensive government economic planning based on welfare capitalism. The Norwegians boast the highest GDP per capita on the planet.
What of the dark side? Lacking stimulus, Ireland’s economy contracted last year by 7.1 percent. The Irish, by the way, significantly reduced their corporate tax rate in the late 1990s. Here in the U.S., private-sector wage income shrank last year by about 5 percent. Since early 2008, the dollar loss exceeds $300 billion. That’s also a lot of Ford trucks.
Since New Year’s Eve, American business has added a net of only about 200,000 jobs. The federal stimulus is the reason firms are back on their feet. Europe was more tentative with stimulus, a big reason why that region is in worse shape today. In short, the folly of opposition to relief efforts such as extension of unemployment benefits is like throwing a cigar butt instead of a life preserver to a drowning man. Unemployment is quite corrosive. There is peril in allowing creation of a stratified society.
Venture capitalists today structure their business plans with a specification regarding maximum and most speedy transfer of jobs from a young enterprise to China. There’s loyalty for you.
It is clear to most economists today that lingering corporate refusal to hire poses a significant risk to the onset of a sustainable recovery. Talk about a self-fulfilling prophecy. Business has a responsibility to maintain the industrial base and the society whose stability we may have taken for granted. Who said that? Former Intel CEO Andy Grove.
No less prominent Republicans than Richard Cheney and Ronald Reagan asserted (one in word, the other in deed) that “deficits don’t matter. ” Without significant changes to the tax code, revenues cannot deliver a balanced budget. Weak revenues are the largest cause of the deficit – federal tax receipts in the first quarter amounted to 15.76 percent of (a reduced) GDP, while the average since 1947 is 18.04 percent. We grew a lot since 1947. To rapidly reduce deficits at this point would mean flirting with a severe economic decline that looks “downright frightening.” I didn’t make this up; the writer is Jeremy Grantham, one of the most respected money managers on the planet. It is essential for everyone to comprehend that the only significant contributions to positive economic indicators (and there still are some) have since early last year been reflective of government efforts to shore up the economy.
What would some rather have? Depending on the discretion of that 1 percent to dole out a little largesse now and then? I don’t know about you, but slavery has never appealed much to me.
The U .N.’s Human Development Report of June 8 tells us the United States is “better” than Turkmenistan in terms of income inequality, but 76 countries place ahead of us. Perhaps now we can all see what’s behind all the talk about deficits and socialism. The well-off among us should recruit workers, not word warriors.
Gregory Iwan retired to Longmont in 2007. Mercifully, only about one-fourth of his career was spent as an economist.