Reddit mentions of Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class

Oi... I promised myself i wouldn't post in a politically charged thread like this. I hate posting in threads like this because i tend to get at least one death threat per post, but there seems to be some misinformation going on around here.

First, you are right. Taxing the Rich's income by another 10 or 15% won't do SHIT to help the economy. Yes, they have a lot of WEALTH, but WEALTH is, by deffinition, what has already been earned. If i have 20 bucks in my pocket and i have nothing else, no bank accounts, no credit cars, then my wealth is 20 bucks. If i go and take out a 10 thousand dollar loan, i now owe 10 thousand dollars, and have 10 thousand dollars. Therefore, i have 0 wealth because wealth is what you have minus what you owe (in simple terms).

There isn't a lot that can be done to tax wealth. You have property tax, but that's mostly a state thing and NOT a federal thing. The Federal government makes 80% of its annual cash from payroll and income taxes, and another 15% from corporate income tax. Source

So, then what the federal government has to deal with it's nearly 15 trillion dollar debt, and (more to the point) 1.2 trillion dollar deficit Source, is income tax. Basically income tax.

So then, let's look at the income tax of the united states! Here we can see a nice little breakdown of what percentage of U.S. citizens have what income bracket. Nice, except the $250k cut off point doesn't help us in our discussion, we need to go deeper.

According to Wiki.answers, the annual income of the united states is 7.5 trillion dollars. That's everything, every dollar made. Every single dollar made.

Now, this next part was tricky. After half an hour of google searches and OWS blogspam shifting, i couldn't find exactly what percent of that was made by the top 1% of earners. So i took it from a Book i read a while back. This graph shows quite nicely that the Top 1% of earners in the United States earned roughly 16% of all annual household income. So, 16% of 7.5 trillion is roughly 1.2 trillion dollars.

Hm, that number sounds familiar. So why not just hike up the tax rate to 100% and call it a day?

Nooot so fast there sparky. As we can see Here the top 1% already pay roughly a 35% tax rate (before deductions and what not, this number can go down to as low as 20%, but i'm not going to cite that) on top of a flat tax because of their bracket. This means that even IF we hiked up the tax on the top 1% to 100%, we would still be at a deficit of what they pay now, which is about 35% of ALL federal income tax paid Source.

So no, "Just" increasing the tax on the wealthy does not close the gap, even if you take it to an extreme. The reality is that we'd probably never get over a small amount (5,10,15% [speculation]) of tax increase before unintended consequences (lower total income, less people working, people moving out of the country, ect) start kicking in. And let's be honest, a 100% tax rate on the top 1% would never fly when we can't even get a 5% increase through without having damn heart attacks.

Increasing taxes on the wealthy can help close the gap, but it would never be enough. There HAVE to be spending cuts somewhere. I, as many others, support a strategy of both mildly increased taxes with spending cuts (for me personally, cutting the military budget would be a fantastic place to start as they spend half the deficit alone in just the DoD; so cutting the DoD in half would cut the deficit by 1/4).

Tl;Dr Increasing taxes on the 1% can't achieve anything on it's own. At the most extreme point it could be, it would solve 65% of the current deficit. At more practical levels, it might be able to chunk out 5-10%. There have to be budget cuts, there "isn't enough money but they're just hogging it all".

Did the New Deal end the Great Depression? No. Did it make things worse? Absolutely not. Did it help millions of Americans avoid poverty and starvation? Emphatically yes. The period from 1933 to 1937 remains the fastest period of peacetime growth in American history. GDP growth averaged approximately 10% per year. You can see the full range of data here. Also, the PWA and WPA created the infrastructure the United States to grow for decades to come. The former completed projects in all but three counties of the United States such as the Triboro Bridge, the Lincoln Tunnel, and the Bonneville and Grand Coulee dams; the latter built 78,000 bridges, 1,000 tunnels, 6,000 schools, 67,000 miles of city streets, and 572,000 miles of rural roads (among a ridiculous number of other projects).


Additionally Roosevelt's monetary policy was probably more successful than his fiscal stimulus. First, the bank holiday restored the confidence of American savers and investors more so than probably any other action. Banks were closed on March 9, 1933 and began to reopen only after thorough auditing. When the banks opened on March 12, depositors, despite the suspension of gold convertibility, began putting their money back in the banks. Within a week, $1 billion had been put back into the banking system that had fled during the runs on banks prior to Roosevelt's inauguration. On March 15, the New York Stock Exchange opened for the first time in 10 days and the Dow jumped 15%, which was the largest single day movement in its history. By the end of the month of March, 2/3 of all banks were reopened and $1.5 billion had returned to the banks.

The second major act of monetary policy was the suspension of the gold standard. That action was overwhelmingly supported by financial and consumer markets. It removed a major deflationary burden from the American economy. Keynesian bias or not. On the day the change was announced, the NYSE jumped 15%. Within three months, wholesale prices had risen 45%. This lowered the real cost of borrowing significantly and investment began to flow into the private sector—orders for heavy machinery rose 100%—and into consumer markets--auto sales doubled. Overall industrial production rose 50%. By early 1937, overall industrial production had returned to its 1929 peak. Unemployment, moreover, had been halved from 25% nationally in 1933 (with certain cities and demographic groups even worse off--75% of black women in Detroit were unemployed) to about 12%-14% in early 1937 (Unemployment statistics prior to 1940 are always best guesses as the Bureau of Labor Statistics didn't collect them until then).

In 1937, FDR faced a growing conservative coalition in Congress and had his own misgivings about spending and reduced relief funding which caused a minor recession. Unemployment jumped to around 17%. GDP fell slightly in 1938, but was above its 1937 levels in 1939. Had this small recession not happened, the US may have left the Depression before military spending for WWII began to pick up. As it is, the combination of war production and the draft is what wiped out unemployment by 1942. So the New Deal didn't end the Depression, but it most certainly did not make things worse and was responsible for helping millions of people. There's a reason why FDR was elected four times and the Democrats only lost control of Congress once between 1930 and 1952.

Here's some light reading for you.

• Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt, by H.W. Brands, Professor of History, University of Texas, Austin
  
  
• Franklin Delano Roosevelt, by Alan Brinkley, Allan Nevins Professor of History at Columbia University
  
  
• The Crisis of the Old Order: 1919-1933, The Age of Roosevelt, Volume I, by Arthur M. Schlesinger, Jr., one of the most prolific historians of the 20th century
  
  
• The Coming of the New Deal, 1933-1935 The Age of Roosevelt, Volume II, by Arthur M. Schlesinger, Jr.
  
  
• The Politics of Upheaval: 1935-1936, The Age of Roosevelt, Volume III, by Arthur M. Schlesinger, Jr.
  
  
• Building New Deal Liberalism: The Political Economy of Public Works, 1933-1956, by Jason Scott Smith, who was a fellow and assistant professor of history at Harvard and Cornell and is now at the University of New Mexico.
  
  
• "Lessons from the Great Depression for Economic Recovery in 2009," Christina D. Romer, Council of Economic Advisers
  
  
• Lords of Finance: The Bankers Who Broke the World, by Liaquat Ahamed, who worked at the World Bank and for several investment management groups. The book won the 2010 Pulitzer Prize in History.
  
  
• Stayin' Alive: The 1970's and the Last Days of the Working Class, by Jefferson Cowie, assistant professor of labor history at the Cornell School of Industrial and Labor Relations.
  
  
• Making a New Deal: Industrial Workers in Chicago, 1919-1939, by Lizabeth Cohen, Howard Mumford Jones Professor American Studies at Harvard
  
  
• Freefall: America, Free Markets, and the Sinking of the World Economy, by Joseph E. Stiglitz, winner of the 2001 Nobel Memorial Prize in Economics and a professor at Columbia
  
  
• Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class, by Jacob Hacker and Paul Pierson (Director of the Institution for Social and Public Policy Studies at Yale and the Avice Saint Chair of Public Policy at UC Berkley, respectively)
  
  
• Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, by Esther Duflo (Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT)
  
  
• The Return of Depression Economics and the Crisis of 2008, by Paul Krugman, winner of the 2008 Nobel Memorial Prize in Economics and a professor of economics at Princeton
  

even if tax policy doesn't strike the root cause (which many would actually argue otherwise, recommended reading Winner-Take-All Politics) i don't see why it wouldn't help solve income inequality as long as the additional tax revenue goes toward supporting new and existing public welfare.

I've just read Winner Take All Politics, a review of the past 30-40 years of US politics and how they've caused wealth transfer to the very rich. It's changed my opinion on quite a few companies, and a few issues.