Tuesday, June 05, 2007

Bush's "Magic" Economic Formula:
The Rich Get Richer; Regular People Lose Ground

From AlterNet:

Not, perhaps, as a general rule, but in an economy like ours, handing out money to rich people is the least effective way to make a healthier, stronger economy that benefits society as a whole. There are two reasons.

The first is that the Ayn Rand fantasy is a fantasy. For the most part, when people with millions of dollars get an extra hundred thousand, or several hundreds of thousands, or even millions, they invest it passively, in financial instruments and real estate.

So we get, for example, a real estate bubble. Which is worse that a dot.com bubble because a dot.com bubble is symptomatic of the excitement of investing in new, high risk, but high reward enterprises that are producing new things. A housing bubble is symptomatic of lots of money floating around with nowhere productive to go. The other reason is that insofar as investment does go into business, in terms of our society, there's a hole in the bucket. The hole is called globalization.


Lots of money is moving. As it passes through the company, the company profits. The company isn't going to build anything, so profits are spent on executive compensation. The actual work is outsourced (the money flows out), and no jobs are created. Nor does the actual business grow very much either, except as a middle man, taking American money and passing it on to foreign businesses (and oil producers).

At the same time, this creates downward pressure on normal working people.

Click here for the rest.

So the double-whammy of throwing money at the rich combined with globalization, or what are together more politely called "free market" principles, grows the economy but skews the vast majority of the benefits toward the upper end of the income spectrum. The old slogans about economics simply no longer have any relation to reality. Tax cuts don't help Americans, at least not the kind we've been seeing for the last six years. A rising tide does not raise all the boats. "Free trade," as implemented by both Democrats and Republicans for nearly three decades, isn't good for America. What's good for Wall Street is not good for Main Street.

I'm no communist, but this situation is unacceptable. Business in this country could not thrive without government intervention, and we pay for that with our tax dollars. That is, the Milton Friedman notion that a corporation's responsibility is only to its shareholders cannot be tolerated.

These businesses owe us, and it's time for them to pay up.