Thursday, July 10, 2014

5 Reasons the Rich Are Ruining the Economy by Hoarding Their Money

From Alternet:  http://www.alternet.org/economy/5-reasons-rich-are-ruining-economy-hoarding-their-money

Why supply-side economics just doesn't work

By David Atkins June 26, 2014

It has been nearly four decades since the Reagan revolution in supply-side economics came to power in the United States. Tax rates on the wealthiest Americans are at near record lows, asset values have been pumped up to record highs, and corporate America is sitting prettier than ever before. There can be no question but that the ideologues who promoted supply-side economics have succeeded in enforcing their vision policy on our lives. But their decades-long experiment has also proven to be structural failure at every possible level (except for padding the pockets of the top 1%.) Here are five things we know without doubt about supply-side economics today:

1. The money doesn't trickle down.

Of all the failures of supply-side economics, this is the most damning. Conservatives often excuse poor wage growth and high unemployment as part of the global competitive marketplace, saying that everyone needs to tighten their belts. But not everyone is struggling--in fact, the rich are better off than ever. They  control half of all the wealth, and the top 10%  control almost 9/10ths of it. Corporate profits are  at or near record highs, disproving the myth that the middle class must suffer due to competitive pressures. The Dow Jones index is threatening to burst past 17,000. Meanwhile,  wages have stagnated since the Reagan era, even though  productivity continues to increase

Corporate executives, in other words, are forcing workers to toil longer, harder and smarter than ever, but all the proceeds are going into the hands of the very rich while the people actually creating the wealth are struggling harder than ever to get by. Republicans either wave away this phenomenon as insignificant, or desperately attempt to blame regulation and "crony capitalism." Of course, the last time economic trends were so disproportionately imbalanced against workers was the era before the regulatory and tax increases of the New Deal, nor is there any significant sense (outside perhaps of military contractors favored by the GOP establishment) in which government contracts play a larger role in the economy. Instead, the truth is obvious: corporations don't exist to create jobs but to rake in money, and most rich people didn't get rich by being generous. When you give corporations and the rich more money, they simply hoard it and find ways to make themselves even more money--preferably by employing as few people as possible, at the lowest wages possible.

2. The rich aren't investing almost half of their resources. 
This one is almost comical. In concept, supply-side economics is supposed to work by the corporate rich taking money gleaned by tax breaks and subsidies, and plowing it back into investments that theoretically employ people. Now, we already know that the economic life doesn't actually work that way: when wealthy individuals and companies invest, they tend to do it in financialized vehicles, mergers, acquisitions and interest-bearing accounts while employing the fewest people possible at awful wages.

But even if it did work as supply-siders theorize, the brutal reality is that the  rich aren't investing almost half of their money (corporations aren't doing much better, as their record profits  sit largely idle avoiding taxation). 40% of the assets of the wealthy are sitting in deposits: the rich person's equivalent of stuffing money into a mattress. Money sitting in deposits in Swiss and Cayman Islands accounts is essentially wasted wealth. It does as little good for the world economy as gold hoarded by a dragon in Middle Earth. It essentially sits there uselessly as an economic security blanket for the very people who need it least. By contrast, putting more money into the hands of the poor and middle class pays off immediately for the economy, as most people living paycheck to paycheck spend the money immediately or at least create a small backstop against bankruptcy and delinquency--thus creating immediate economic and social benefits. So not only does giving the rich more money not pay off when they do invest, it doesn't even have the opportunity to pay off at all since almost half of the money isn't even being invested.

Continue reading at:  http://www.alternet.org/economy/5-reasons-rich-are-ruining-economy-hoarding-their-money

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