As the political establishment argues whether to increase taxes on the top percentile of the population, a forgotten body has been left behind to struggle and that is the middle class. With stagnant employment numbers, increasing income disparities, and the rise of poverty, you begin to wonder if this is the extinction of the “American Dream”. Due to the epidemic effects of the 2008 economic crisis, the US has entered into a “Lost Decade” where aspiring youths and families are finding that they had been swindled into the misconception that their dreams were supposed to be attainable through hard work and valiant principles. As a result, many are discovering that the economic environment has changed for the worse where many are feeling "stuck" due to lack of opportunities and upward mobility within the social structure.
Throughout the media, you hear certain individuals argue that if the Obama administration increases taxes, it will put the economy into another tail spin, thus damaging the fragile recovery within the US. In an MSNBC interview, Louisiana Congressman Jon Fleming, who is the owner of numerous CVS and Subway franchises, explained that out of the $6.3 million he makes annually, he is only left with approximately with $400,000 after overhead costs and investment. He goes on to say that he is only able to feed his family with $200,000 after personal expenses. Basically, spending $200k is a huge discrepancy compare to the average household where they are living under a constraint budget. Unfortunately, not many families can send their kids to a Trinity School for their primary and secondary education or an Ivy League for university. Furthermore, not many families can holiday to the Turks and Caicos Islands in their yacht or have a fine cuisine at the Alain Ducasse au Plana Athénée in Paris. When certain individuals go on MSNBC’s “Morning Joe” show to grumble about class warfare, they are not speaking in the interest of the common person. They do not have to worry about a serious illness bankrupting them or the threat of losing their homes if they miss a mortgage payment.
In economics terms, would increasing taxes really hurt the US economy? Milton Friedman and John Maynard Keynes opposed increasing taxes during an economic slump and supported tax-cuts to promote consumer spending which in turn provides economic growth via the trickle-down effect. However, such an action should only be implemented for a short period of time until the economy innovates and fixes itself to full capacity. The Bush tax-cuts were supposed to promote heavy growth and spending especially amongst the top 1%. Theoretically, having extra money strengthens the consumer’s purchasing power by either investing in a business, which creates jobs, or to buy high end products such as technology (e.g. TVs, I-Phones, etc.) or manufactured goods (e.g. cars, laundry machines, etc.) to help sustain growth. Yet, when the beneficiaries of the Bush tax-cuts put their extra tax-return capital into savings to wait out what economic conditions will look like in the near future, off-shore accounts to avoid paying extra taxes, or high-end risk products such as credit derivatives, such policies only discourages supply side economic growth. Most of the Bush tax returns went into higher risk investments that helped build the derivatives market, which created a market worth $5 trillion and subsequently the 2008 economic collapse.
Currently, the economy is suffering from a vicious ailment and whatever actions taken by the Federal Reserve or Treasury has so far been ineffective in relieving the hemorrhage. With stagnant growth and high unemployment, using a classical economic approach to solve these problems have been proven futile so far. This economic malignancy is not the typical anachronistic recession since financial engineering help launch an intricate game theory model highly dependent on devious computer programs focused in advancing the alacrity of information. As a result, arguing about old economic theories will not apply to the current crisis since it is something that has not been dealt with before. Additionally, to make matters worse, everyone bases themselves on data recorded through the years. However, we do not have enough data recorded to create models that will be statistically relevant such as predicting the weather base solely on the sun.
When certain politicans argue that increasing taxes would hamper their abilities to invest and create jobs, it should be viewed with skepticism. When they say they would create jobs, they mean low-paying jobs at retail stores or temporary office jobs with no benefits with the strong possibility of being outsourced. With the average American owing credit cards, school loans, and experiencing inflated prices within goods and a decreasing salary, I doubt a minimum wage job will help sustain an individual, especially one with a family, to keep his or her head above the water. Similar to the pre-French revolutionary times, the average Joe and Jane has become both the peasant and servant in a society dictated by the few wealthy plutocrats. Society has become accustomed and sympathetic to seeing Kim Kardashian cry about losing her $75,000 earring while holidaying in French Polynesia. Yet, on the flip side nobody cries for the families that are forced to move out due to a home repossession or when once vibrant towns become ghost towns due to a factory closure. All I can say is remember the French Revolution where the influential Maximilien Robespierre said, “Any law which violates the inalienable rights of man is essentially unjust and tyrannical; it is not a law at all”. So far, influential entities have been bailed out and the individuals responsible for the crisis are not held legally accountable for the reckless practices they took. At the same time, when someone from the struggling middle class is unable to pay the mortgage, the county sheriff arrives to change the locks of the house, thus leaving the family homeless.
For the US to make economic progress, it is important to remember that we are all in this together and it is vital that we work together in resolving this man-made problem rather than fight against one another.
No comments:
Post a Comment