The Great Wealth Transfer

An interesting article by Paul Krugman called The Great Wealth Transfer (published in Rolling Stone of all places, I guess Krugman is a rock star economist) discusses why even in a growing economy many Americans are not happy with the economy. This is because most Americans are not participating in this economic growth as the gap between the rich and the poor to middle class grows.

Rising inequality isn’t new. The gap between rich and poor started growing before Ronald Reagan took office, and it continued to widen through the Clinton years. But what is happening under Bush is something entirely unprecedented: For the first time in our history, so much growth is being siphoned off to a small, wealthy minority that most Americans are failing to gain ground even during a time of economic growth — and they know it.

Reasons for the widening wage gap include corporate greed, union busting, and failure to increase the minimum wage. And the Bush administration’s tax cuts aren’t helping anything.

What about the claim that the Bush tax cuts did wonders for economic growth? In fact, job creation has been much slower under Bush than under Clinton, and overall growth since 2003 is largely the result of the huge housing boom, which has more to do with low interest rates than with taxes. But the biggest irony of all is that the real boom — the one in the 1990s — followed tax changes that were the reverse of Bush’s policies. Clinton raised taxes on the rich, and the economy prospered.

I will say that as interesting as this article appears Krugman does fail to provide the statistical analyses and background to support his claims. Maybe just because it’s a popular article in Rolling Stone, but I still have doubts even if (and perhaps because) this is exactly the kind of thing I want to hear.

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