Digression -- an important economic fact

I commend to your attention Jeffrey A. Winters in The American Interest, with the essential truth about our present historical moment, that gets obscured in the deliberate distractions thrown up by politicians and journalists who would rather make us think and talk about something else. Pull quote:

Despite polls consistently showing that large majorities favor increasing taxes on the wealthiest Americans, policy has been moving for decades in the opposite direction. Reduced taxes on the ultra-rich and the corporations and banks they dominate have shifted fiscal burdens downward even as they have strained the government’s capacity to maintain infrastructure, provide relief to children and the poor, and assist the elderly.

Everyone is by now aware of the staggering shift in fortunes upward favoring the wealthy. Less well understood is that this rising inequality is not the result of something economically rational, such as a surge in productivity or value-added contributions from financiers and hedge-fund CEOs, but is rather a direct reflection of redistributive policies that have helped the richest get richer.

 

Winters attempts to explain how this happens within an electoral republic in which the very wealthy directly possess only a tiny minority of the votes.  But the history is revealing. The average income of working class Americans tripled from 1920 to 1970, but then it stalled out. But after the crash of 1929, incomes of the very wealthy stagnated. But then:

The decade from 1970–80 was the turning point in the Great American Inversion. This is when the boom for the average household turned to bust and the rich soared after decades of treading water. It is as if a big pause button had been hit in 1970 for the bottom 90 percent at the same moment the fast-forward button clicked on for oligarchs. The cumulative effect was breathtaking. By 1990, real incomes for the top 1 percent exceeded the 1920 level threefold and continued to rise thereafter, while those of the majority did not budge. Reversing the pattern of previous decades, the richer you were, the faster gains accrued. It did not matter if Democrats or Republicans were in charge of the White House or Congress. By 2007, the top 1 percent of households had almost five times the real income they had in 1920; the top 0.1 percent had around six times, and the top 0.01 percent were awash in nearly ten times the real income they had enjoyed nine decades earlier. The tables had turned.

 

Keep in mind that after the 16th Amendment was ratified in 1913, allowing a federal income tax, it was originally imposed only on the highest 1% of earners. In 1918, the top marginal tax rate was 77%. But the wealthy exercised all sorts of methods of tax avoidance and didn't really pay that much, so in search of revenue the government began to shift the burden downwards. Nevertheless, marginal tax rates on the very wealthy remained above 90% from 1944 to 1964, and stayed above 70% until 1981. As Winters points out, taxing the so-called "job creators" did not, in fact, stop jobs from being created -- it was exactly during that period the real incomes of working people increased dramatically. But today, while average people's fortunes are stagnating, the ultra-wealthy pay little in taxes at all, a fact of which Donald Trump is proud and which his cult followers find admirable. Thinks about it.