In the 1980s, the American rich and the American poor were far wealthier than the rest of the world’s rich and poor.
This caused the socialists in academia to gnash their teeth. They believed that we should embrace economic leveling as a means to achieve economic equality for mankind.
Well, today, middle-class and poor Americans have slumped behind our neighbors to the north in Canada, as well as several European countries. I wonder if the academics are cheering now.
Truth is, the great worldwide leveling is in progress, and rather than increasing the wealth of the world, we’re seeing the American middle class robbed and beaten down by excessive wage competition and the systematic deindustrialization of the country.
Just the Facts
On April 22, 2014, The New York Times published a piece that cited much of the current research on the middle class. The article opened with this gut punch: “The American middle class, long the most affluent in the world, has lost that distinction.”
The article continues with the fact that “after-tax middle-class incomes in Canada – substantially behind in 2000 – now appear to be higher than in the United States.”
The key phrase is “after tax.” The United States has continued to aggressively increase taxes while most other countries have been lowering tax rates to make their products and labor forces more competitive.
Meanwhile, the American middle class is having difficulty saving. With savings and capital being taxed excessively, only the wealthy can accumulate enough seed corn to plant a new business or prepare for the future.
And this isn’t just conjecture. The numbers have all the proof we need: “Median per capita income was $18,700 in the United States in 2010 (which translates to about $75,000 for a family of four after taxes), up 20% since 1980, but virtually unchanged since 2000, after adjusting for inflation. The same measure, by comparison, rose about 20% in Britain between 2000 and 2010, and 14% in the Netherlands. Median income also rose 20% in Canada between 2000 and 2010, to the equivalent of $18,700.”
Look at the dates closely. Ronald Reagan dramatically cut taxes in the early 1980s, and income shot up 20%. But since 2000, the economy has provided virtually no wage growth for the middle class.
Think about the policy changes we’ve seen. George W. Bush, who called himself a “compassionate conservative,” greatly increased the size of the government. Then Barack Obama doubled down and grew the government even more.
If wages are to grow in America, wealth creation must resume. That only happens when capital formation and growth are encouraged… not penalized.
And it isn’t just taxes. Deficits are also a problem. When deficits are large, capital is taken from the private sector, which is a productive use of capital, and redirected to the government, which is an unproductive use of capital. In fact, the least productive capital transaction for the middle class is when a wealthy person buys government bonds. When this happens, the money goes directly to unproductive uses, and the wealthy person is paid a nice return on top of it!
Instead, we need to encourage the wealthy to put money into new businesses and private enterprise, and this won’t happen as long as they can see fruitful returns from investing in tax-free municipal bonds.
Ultimately, government is a millstone on the economy. But it really doesn’t affect those who have money… It only affects those who want to acquire money through their labor and enterprise.
In essence, the golden goose is being suffocated. But the government elite and the moneyed elite continue to do well. Only the emerging classes are devastated, and the people can’t even see through the lies.
Your eyes on the Hill,