To Help Address Inequality, Invest for Growth

Democrats in particular often have a tendency to lose sight of the big picture. Hillary Clinton’s economic proposals are a case in point: a whole laundry list of initiatives, many of them important and worthy, but nonereally getting to the heart of the core issue facing America – which is stagnating economic growth.

BLS_GovtInv_NatlDef_Stats.xlsx

The Federal Reserve Bank has done its bit by buying bonds and holding down interest rates. But the net effect of Fed actions has been to inflate asset values, which is turn has contributed to the inequality of wealth and income in the U.S.

Congress, on the other hand, has completely failed to do it job. Even though we have inflated asset values and increased asset-related income from dividends and stock appreciation, taxes on wealth and asset income are at historic lows, further exacerbating inequality.

Meanwhile, government investment in infrastructure and other fixed assets has declined significantly since the great recession of 2008, with all levels of government failing to step up to the challenge.

How “stupid” is it really that at the very time when the real cost of borrowing is near or below zero, Congress (and state and local governments) ratchet back on investment? Especially when the overall condition of our infrastructure – roads, bridges, transit and airports – is so awful.

No wonder we have an inequality problem in this country. We have inflated asset values; kept asset related taxes low; reduced investment in infrastructure and failed to maintain reasonable levels of growth in the economy that Americans depend on for jobs.