Marie Schofield, chief economist, and Toby Nangle, head of multi asset allocation at Columbia Management, have a great little note up reminding people of the basic force that's holding back the economy.
For decades, the top 5% have been accumulating an ever-increasing share of the national income in the U.S.:
Columbia Management
The remaining 95% were only able to keep their buying power up by taking on more debt.
Lately that hasn't been an option.
The excerpt of the report the post cites pretty much says that the gains of the top 5% since 1980 have come as wages for everybody else have stagnated, or in some cases declined. Widely available credit at steadily lower interest rates from the post-Volcker busting of inflation (and the destruction of manufacturing jobs at the same time) masked the drain the inequality produces on economic growth, but here in the aftermath of the Great Recession, debt growth for the 95% isn't really an option, and growth has been lousy. I think that minimal credit growth, combined with household deleveraging and adoption of labor-saving technology are most of what's to blame for the slow recovery in jobs in this chart, and that the impact of both a decreasing share of productivity growth for the bottom 95% and the adoption of technology can be seen in each of the 3 most recent recessions (one could make the point that the last four recessions have been the slowest peak-to-trough-and-back in the post-war period):
from : Calculated Risk
Corporate profits and and shareholder returns have soared during that time, while wages have stagnated and debt loads have increased for the non-rich. Maybe it is just coincidence that these changes have correlated with the era of tax cuts and "trickle-down economics", but I believe there is causation. While Dave Camp's recent tax reform plan called for two tax brackets and a tax surcharge that is in effect a third tax bracket, while continuing to tax capital gains and dividends at a reduced rate, I believe we need even more brackets than we have now (with higher marginal rates at the top), with dividends taxed as regular income and capital gains taxed at 28%, just like in the horribly oppressive high-tax days of the early Reagan administration.
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