The Occupy Wall Street protests kicked off an awakening to the disparity between incomes in the United States, calling attention to an economic abyss separating the wealthiest 1% from all other Americans. A new nonpartisan puts the income gap into the perspective of history.
Our country’s economic strength through the Twentieth Century has been characterized by the strength of the middle class. However, beginning in the decade of the eighties, the economic and fiscal policies of Ronald Reagan changed course to another philosophy of growth, one that put its emphasis on cutting private sector taxes and on taxpayers in the highest income ranges. The goal was for the impact of spending by these people to trickle down the economic ladder and benefit everybody.
The outcome of this policy could not have been worse.
The analysis released yesterday by the nonpartisan Congressional Budget Office (CBO) shows that, between 1979 and 2007, the real, after-tax incomes of the wealthiest 1% rose by 275%, while the 60% of the population in the middle economic strata saw their real after-tax incomes grow by not even 40% over almost three decades. These differences are in large part explained by technical innovations in the labor market and changes in the governance and structure of executive compensation.
Furthermore, the CBO showed that over these 30 years tax policies were being modified, becoming less progressive. The consequences of this era of redistribution of wealth to the high end of the economic ladder were to leave a diminished middle class, vulnerable under a heavy load of debt.
It is indeed the middle class consumers that moves the economy, but the greed of the financial sector left them hanging, with neither cash nor credit to keep on buying.
The CBO incomes analysis shows the impact of thirty years of this failed tax policy. It has failed to create a real demand and has also led to budget deficits.
In view of all this, it is a matter of concern that the House of Representatives shuts its eyes to these facts and keeps on pushing formulas that have never been able to produce the hoped-for results.
The Wall Street protests should be in Washington, because that is where the policies were established that led to such income inequality, setting records in the developed world. And worse yet, even more of the same is being promoted for the future.