The U.S. Economy is broken. Long-term economic growth is fluctuating on average between two and three percent which ranks this as perhaps the worst economy since W.W. II excluding major recessions.
Decades of adherence to “supply-side” economics (translation: tax cuts for the rich) is mainly to blame.
In addition, advances in information technology, globalization, the decline of unions, and the government’s virtual abandonment of worker protections, have exacerbated income inequality. This, in turn, has resulted in lackluster demand and contributed to slower overall growth.
So how do we fix it? Well, we should do the exact opposite of what has been done for decades since the 1980’s. Rather than cutting taxes, we should be investing to grow the economy. It is called “demand-side” or “Keynesian” economic theory.
Under this approach, the government can act to stimulate demand and growth by investing directly in infrastructure, such as highways and rail systems, and in people, in programs such job training, health systems and education. That’s what progressive Democrats are getting at when they talk about things like the “Green New Deal” and “Medicare-for-All.”
In effect, the Progressive wing of the Democratic Party is having a long overdue conversation about failed economic policies and what is really needed going forward to grow the economy in a way that distributes the benefits more equitably to all Americans.
How do you pay for it? Thanks in large part to long-standing adherence to “supply-side” economics since the 1980’s and resulting tax cuts, we now have a hugely regressive system where wealthy individuals, who derive a significant portion of their income from interest and dividends, pay less in taxes as a percentage of income than average working men and woman.
And if that isn’t bad enough, our tax code is riddled with loopholes that corporations and other wealthy individuals and businesses often use to avoid taxes altogether.
It needs to be fixed – and that is what Democrats are getting at when they talk about raising taxes on the wealthy: It is really about making our tax system fairer and more progressive so we have the resources needed to invest for the future, stimulate economic growth and reduce income inequality.
And so those who have benefited the most, pay taxes in proportion to the benefits they’ve received.
Radical ideas? Hardly. They worked in the aftermath of W.W. II, one of the greatest periods of overall economic and wage growth in American history. And they can work again.
So let’s start by at least having the conversation and not demonize as “radicals” and “socialists” those who dare to talk about important economic issues affecting the lives (and livelihoods) of everyday Americans.
And when we are done talking, let’s actually get it done.