Discussion in 'Economy' started by JBeukema, Jan 3, 2011.
Michael Hudson: History of US shows economy grows when top tier tax rates and workers wages are high
Wonder if that is because Higher taxes on the top 1% pushes more purchasing power into the hands of those in the bottom 99% where actual and efficient consumption really goes on and thereby increases demand which is good for the country? I believe that the immediate problem righ now (not the only problem) is a lack of demand and a production capacity that is only at 71% meaning we have 29% excess production capacity.
It's laughable, but Reagan bubbleheaded supply siders think that demand is not the problem but that it is a lack of supply that is the problem and they want more windfall tax breaks for the wealthy thinking that they will invest every penny in tax savings into production inspite of the fact that there is a weak demand. Man, they just refuse to get it. Even Milton Friedman said that people don't alter there short term spending patters readily just because they get a bump in income.
Why not tell the class how that alchemy comes about?
A couple of things.
First of all, does the author show a causal relationship? I skimmed over the beginning part and he does not mention it.
Second, what matters is not marginal rates but effective rates. Effective rates have never been as high as marginal rates.
Third, using the recovery from the Depression is spurrious. The drivers of economic recovery in the 30s had little to do with productivity growth.
Full capacity in this country is not 100%. Full capacity is considered to be around 83%-84%.
Umm the market in the USA is saturated. Most people spend more than they make.
There can be no real sales growth without job and or wage growth.
Increasing income for the top 1% does not create hardly any more sales.
Increasing income for the bottom 50% is almost a direct corelation of income to sales increases, they spend all they get and then some.
We spent how much on unimployment ins benefits? Every dime of that rolled right back into the economy.
That was my first thought too, and I listened to half of it and he didn't demonstrate causation.
He did point out that the original income tax was reserved for people making over $150K/anum in 2010 dollars and cited a source at wiki for his facts:
Taxation history of the United States - Wikipedia, the free encyclopedia
His facts are interesting but he generally doesn't support them in the interview.
edited to add:
His general thesis that productivity increased faster than wage increases and that increasing wages therefore the most profitable business model seems squishy at best. I am sure there are exceptions, but I don't think that is the rule.
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