June 2, 2012
The biggest issue in this election year is “the economy.”
Most progressives argue that more stimulus is needed and that it should be financed by restoring a progressive tax policy, a principal feature of which would be to allow the abnormally low tax rates and special breaks for those with high incomes to expire.
Republicans believe that doing this this would hurt “job creators”; that government spending and “entitlements” should be cut and low tax rates and special breaks for those with high incomes (people they call “job creators”) should not only be extended, but even expanded. Their response to the argument that the current economic decline has occurred during a period in which the gap between the rich and the poor has grown even wider is, in effect, that it hasn’t grown wide enough.
Republicans claim that loss of revenue from lower taxes will be offset by higher revenues from the more vigorous economy that will result from stimulating “job creators." Democrats claim that the cost of added government expenditures will be offset by higher tax collections imposed on those who enjoy high incomes.
The problem with the Republican position, apart from its embrace of rank inequality of wealth, is that the basic economic problem we face is not lack of funds for investment, but lack of demand. For this reason, giving rich investors more funds to invest while further crippling the purchasing power of poor and middle middle class people will fail to perk up the economy and increase hiring; in fact it will have the opposite effect. Undertaking much needed public projects, including restoring cuts in educational and other vital services, financed by instituting a more progressive and less corrupt tax and subsidy policy, will stimulate demand, resulting in increased hiring and lower unemployment, and provide a better investment climate even for the rich.