What Changed

Merry Christmas, y'all. In the economic news are reports that the stock market has topped 18,000. You may recall that it was at 12,000 when the crash occurred and dropped to 6,000. Also, the past quarter the rate of GDP growth was an annualized 5%, largest in years.

I was reminiscing the other day thinking about those Popular Science and Popular Mechanics magazines of the 1960s where there were predictions of flying cars and so much leisure time we would enter another Age of Enlightenment. What on earth happened? I had to wonder how those prognosticators expected people to make a living and buy groceries and those flying cars. Now it seems that it wasn't the science that was so far off but, rather, the economics. Personally, I'm driving a 13 year old pickup truck and it still has wheels that touch the road. Until the City of Somerset began introducing some competition into the local gasoline market I wasn't certain that those wheels would even roll.

So, what was it that gave those writers any reason to assume that having all that leisure time would result in having enough money to live on? Well, for starters, from the time of the Great Depression forward it had always been assumed that the people in general would share in any increase in wealth proportionally since the axiom was “a rising tide lifts all boats”. Since 1980 the axiom has been revised to read “a rising tide lifts all yachts.” Since 1980 the productivity of the American worker has increased exponentially but he or she has not enjoyed the wealth associated with such production. In the mid 1960s the tax rate for a family earning $60,000 per year (which was a lot of money then) was in excess of 50%. The top tax rate for those making over $250,000 was right at 90%. In those times the United States was the economic engine of the world and infrastructure such as the interstate highway system was being built which resulted in millions of good paying jobs. Companies had their assembly lines running full blast to fill orders from the expanding middle class that had enough money to purchase their products and that also meant jobs that could support growing families and improved educational aspirations. The future was bright and filled with hope and expectation. It seemed that America had found the Holy Grail then it slipped from our grasp.

Well, it didn't slip from the grasp of every one but only from the great middle class that was the envy of the world. It didn't all slip away overnight. It took 10 years before American corporations concluded that the middle class didn't have enough purchasing clout any more. There just wasn't enough money there to support a business model that was changing to a more demanding model that desired ever increasing markets and those markets were going to be the rest of the world. Only problem was that to sell to the rest of the world the costs of production had to come down and come down they did. Production was shipped overseas and the jobs that supported the middle class went with it. The top tax rate had fallen to 50% and the $60K rate had dropped to 40%. Bridges began to rust and decay, no new interstate projects were being built and domestic steel production had cratered. The neo-conservative elements that had fought the New Deal, Social Security and Medicare were ascendant and they told us that lower tax rates would encourage those who garnered the wealth to reinvest in America and jobs would come and prosperity would reign. Trickle down. It did not happen. It trickled up then it began to rise to the top like a helium balloon.

Now the top tax rate is 33% and the $60K rate is about 28%. Just look at whose rate has come down the most. What about that leisure time? Now millions are working two or three jobs just to keep the lights on and who on earth even thinks about a flying car? Services that were provided by governments are now either eliminated or have been outsourced to private companies with a license to steal from those too poor to notice. The new bridges that are needed over the Ohio River are going to cost a lot of money that government does not have so the powers that be are considering allowing private corporations to build them and then charge motorists for using them. In some places highways are undergoing the same considerations. Let me ask you this. If we pay for them with taxes or with tolls what is the difference other than a portion of the money getting diverted to private pockets?

You've heard it before. Income inequality is strangling our people. We no longer have money to maintain bridges and roads or to pay decent salaries. We have to ask ourselves why. What changed?

Last week there was a news blurb that it had been discovered that Prevailing Wage laws were costing the taxpayer money and that we need to do away with them so companies can use the cheapest labor they can find to do state and federal projects. I have been fortunate enough to work on a few prevailing wage jobs and I can tell you that I never felt I was cheating the taxpayer. What I did feel was that for once I was making enough money to buy a car or perhaps a new automatic washer. It seems that is just the kind of thing we want to happen. I have learned from life experience that when you search for the cheapest job you can find that is usually what you will get. My outlook now is that I want people to make money. When they make money then they buy stuff. It seems plain as the nose on your face but there are those who believe that their life's work is to keep the middle class from becoming prosperous once again. Warren County government is now trying to pass a “right to work” law which is nothing more than a “right to work for as little as you can” law.

Take what you will from this but as “Deep Throat” once advised, “follow the money.” My Take is that we should look at what worked before and maybe try that again.