Extend the Bush Tax Breaks for the Wealthy?: December 1, 2010

"Supply Side Economics" came along with Ronald Reagan. The idea was that if we take care of the wealthy they will take care of us.

Supposedly if we lowered their taxes they would invest their extra money and that would provide jobs for the rest of us. "A rising tide raises all boats." was the saying.

What actually happened was that--little known fact--the Reagan tax cuts ran up the largest deficit since the debt that funded World War Two. Social programs for working class families and poor were cut, unemployment began to be taxed and workers began to be taxed more and more for the cost of Social Security. Social Security retirement age was increased.

The first big layoffs of my career happened with the stock market crash at the end of the Reagan era.

And since Reagan took office, families are working more hours to maintain the same levels of income they once enjoyed and the gap between the richest and poorest in the nation has widened considerably. Rates of indebtedness have increased and savings decreased for the average US family.

It was called trickle-down economics but so far the flow in wealth has been the other way-- from those that produce the wealth on the front lines of industry to those who control it at the top. Executive wages have increased and bonuses gone through the roof while average families work harder to make ends meet.

The tax burden falls more and more on working and middle class families as the wealthy get tax breaks and shelters for investment income.

Extending tax cuts for the rich will not provide more jobs.

Why? Because the problem is demand. There is none. The working and middle class do not have the cash to create demand. There is no demand for goods and services and there won't be until the average family has money in its pocket.

Companies will not hire workers when there is no demand. They are not going to hire people just to be good guys. That is not what they do.

They want to get the price of their stock high and that is what they will do. They will try to grab market share, increase advertising, pay off debt, but they will not be creating jobs until the working and middle class have money to spend.

Cutting taxes for the rich will mean cutting government which will mean laying off workers which will mean less income tax revenue for governments which will lead to more layoffs which will necessitate more government cuts and less tax revenue again--a downward spiral.

All of the government layoffs will mean less demand for products and services because unemployed people do not have money to spend.

Cutting off unemployment insurance will have the same effect. No money in your pocket, no spending it--less demand for goods and services.

A downward spiral.

The supply siders said, "A rising tide raises all boats." The reality was that "a rising tide raises all yachts." Wages are the engine of the economy and this is not where the money was going.

The economy will not rebound until the flow of wealth from those that produce to those who hoard it is reversed. The money needs to flow back into the hands of the people who create it--the working class--the front-line workers of our economic system. We are not expendable, to be ignored. We are the people who support the economy and make it strong.