And economists wonder why demand hasn’t picked up?

Consumers can’t consume if they aren’t making any money.

And, as this chart from Talking Point Memos shows, consumers are getting cut out of today’s economy at an incredible pace:

This isn’t rocket science or brain surgery. If workers don’t have money to spend, they won’t buy goods. If they don’t buy goods, the economy won’t recover. The fat cats and oligarchs may think they can maintain their lifestyle if the rest of us end up selling pencils on the street corner, but I think they’re probably wrong.

America became a great economic power based on the strength of its middle class. Take a look at what’s happening to the middle class, and worry for the future of this nation.

Yet Republicans think the answer is more tax cuts for the wealthy and, yes, raising income tax on those who can least afford it. This chart, I think, shows that what clear-thinking people ought to be concerned about when they hear that nearly half of Americans pay no income tax is the fact that half of Americans don’t earn enough money to pay income tax. Rather than lowering the bar for paying tax, how about trying to raise more Americans above the current bar?

Just a thought.

4 Responses to And economists wonder why demand hasn’t picked up?

  1. Jimo says:

    Indeed.

    You know, a billionaire can consume quite a high value of goods and services. But there’s only so many hours in the day to bathe in caviar. One billionaire may equal ten thousand “thousand-aires” but those 10,000 people will consume far more goods and services just living their lives than that billionaire will. When those 10,000 suffer (or just disappear), this has a significant effect on the economy, leaving it capable of producing more goods and services (closed factories, high unemployment, empty storefronts) than there’s demand for.

    Yet some insist that “billionaires” create jobs! No, close, but no. Billions, not billionaires, create jobs. And putting those billions into the hands of those more likely to spend it (e.g., the unemployed) pushes up demand.

    • melior says:

      Actually, a billionaire equals one million thousandaires. (And in Australia, a billion is a thousand times larger than that.)

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  3. Joe Mostowey says:

    When the consumer economy, which is 70 percent of our economic engine, is starved for fuel (money) the culprit is always the other 30 percent of the engine, the investment economy.

    When the investment economy was running too hot in 1929, the economy crashed. When it ran too hot again in 2007, again the economy crashed.

    Too much of the nation’s capital is tied up in ways that strain the entire economy, stifling jobs, stifling the ability of the consumer to purchase manufactured, and in some cases, raw materials.

    If a farmer, depended on two mules to run his irrigation pumps, and was making a good profit off their labors, decided he needed even more profits, so he cuts the buying of food for the mules, and the mules soon drop dead of hunger, how much profit will the farmer then make with his irrigation system cut off?

    Substitute wall street, and the wealth generated by the stocks being valued at how much of the products those stocks represent (such as sears, or apple) then when wages fall to the point consumers no longer flock to either place to purchase products as they lack spending cash, then the stock becomes worthless – all the wealth they represent ceases to be relevant as the concrete value is gone.

    One of the ways that money was pumped into the consumer economy prior to the 1980s was via high taxes on a progressive scale. The money from these taxes built Dams, Roads, Buildings, Military bases, and a slew of other goods and services, pumping money from the investment sector into the consumer economy.

    When Reagan lowered the tax rates he fell into the same trap that led to the great depression of the 1930’s. Not enough money was being pulled from the 30 percent of the economic engine to run the other 70 percent of the engine.

    And eventually, the concrete values that those stocks represent will fail because too little product will have a market to support the manufacturers and they will go out of business or downsize.

    Even the values held by the financial sector will fall, as people cannot afford credit, or will refuse to risk debt.

    Until the balance between the investment economy and the consumer economy is restored, the Recession we are under will continue.

    And lowering taxes on the high end of the scale while raising taxes at the bottom, allowing even more money to stagnate in the investment economy is not the answer.

    For 40 years, the national debt as a measure of the GDP was steadily falling. Only in the 1980s, with the lowering of tax rates did the trend reverse.

    Isn’t it time some grown-ups started running the country?

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