I have been told it causes crime, gun violence, and is unfair. I say that it isn't a problem and that life ain't fair.
Anyone want to tell me why I am wrong?
The real problem w/ income inequality is consumer demand. Every worker is also a consumer.
During the postwar years, because of a compact between labor and capital, American workers received a greater proportion of the gains from economic growth. There was also a whole policy infrastructure that kept their cost of living low, including subsidized education, cheap health care and retirement benefits.
There were also strictly enforced anti-trust regulations which prevented corporations from merging and forming monopolies (which monopolies would allow corporations to hold Americans hostage to say ever rising health care costs. And when Americans are being bankrupted by artificially inflated health costs, they cannot consume at the needed levels for job growth)
During the postwar years, we had a system that worked. By tying the wages and overall compensation of average workers to economic gains, you created MORE consumption. But business grew tired of the postwar arrangement that created the most solvent middle class in world history... so they poured money into Washington with the goal of lowering wages (by globalizing production) and removing the policies that protected consumers from monopolies and removing all the subsidies that gave the middle class an affordable cost of living, upward mobility and the needed financial security to consume at unprecedented levels. The Reagan Revolution removed all these middle class supports in order to make room for tax cuts to the wealthy.
A problem emerged. The health of the American economy was tied to high levels of middle class consumption. By dismantling the wage, benefit and policy structure that created a solvent middle class, there would be less money for consumption. [You get this right] When the coffee shop worker can't buy shoes, the shoe business has to lay off workers. And, as a result, the laid-off shoe workers can't go to the movie theater, which means the movie theater has to lay off workers and so on. It's called a deflationary cycle of spiraling lay-offs, and it's one of the main reasons workers need to be able to buy the stuff they make. This is why Henry Ford paid his workers enough to buy cars. If you have a consumption economy and your distribution system vastly underpays workers, than the system will not be able to sell its goods.
So the Reagan Revolution faced a problem as it transitioned the middle class into labor rates more in line with Asian and 3rd world norms. How could it sustain consumption in the face of lowered wages and reduced benefits? Answer: credit. Therefore, starting in 1980 American families went on an unprecedented borrowing binge. For the next 30 years hard working families would amass ever greater amounts of debt to consume and keep pace. This stop-gap measure actually worked well in the beginning. The economy, awash in easy credit, grew at a steady pace. But nobody paid attention to the elephant in the room: massive consumer debt.
As you would expect, the crisis of borrowing came to a head when credit markets froze in 2008. Americans were not only tapped out, but they were also unable to borrow at the needed levels to consume and sustain economic growth. Currently, the consumer is too indebted to meet the needed demand requirements to prevent layoffs. Put simply, corporations don't have enough consumers to justify adding jobs. We spent 30 years lowering the wages, benefits, and policy support to the middle class, and twenty years aggressively expanding credit markets to make up for stagnant and disappearing wages. . . and we're out of credit gimmicks to fix the problem.
Meaning: credit cards and fancy mortgages and home equity loans and "no money down" eventually runs its course - and you run out of solvent consumers.
On the other hand, when the middle class has spending money (because of higher wages, stronger benefits and affordable education/health care), the capitalist has an incentive to innovate and add jobs. I'll say it again: the capitalist has an incentive to add jobs when there are MORE consumers with high purchasing power. However, when consumer spending shrinks because of decades of disappearing jobs and stagnant wages, the capitalist must layoff workers.
Reaganomics was the perfect solution when the problem was inflation. However, when the problem is deflation, Reaganomics is poison.
Welcome to it.
