If the wealth and income disparity between the well-off and everyone else continues, or gets even worse.
President Biden needs to level with voters. Inflation will get worse as long as our nation’s wealth and income disparity between the well-off and everyone else continues.
The elites of our society — politicians, athletes, entertainers, investors, doctors, etc. — are making a lot of money for what they do, and pay too little in taxes. They buy homes at bankruptcy prices and rent them to the people who lost their jobs and homes. Or tear them down to build mansions.
They buy the best of everything for their families, relatives and friends: food, phones, computers, toys, clothing, and services — from investment advice to educational opportunities.
A growing economy always has inflation, and everyone — rich, poor and middle class — is hurt by it. But those who cause it benefit far more than they lose.
Today’s inflation is the worst kind for low and middle income Americans. Those who made more money than they spent during the pandemic are going on a buying spree. Those whose incomes stagnated or were eliminated during the pandemic now can’t afford to buy what they need.
President Biden’s economic agenda would create the kind of inflation our economy needs: wage inflation. He would raise taxes on corporations and the wealthy, who will continue to do well, and thus reduce the inflation they cause. The tax revenue would pay for infrastructure and government services, and would create higher-paid jobs.
That’s how Roosevelt’s New Deal started building the world’s greatest and most vibrant middle class. From 1933 to 1980 political leaders managed our capitalist system in ways that improved the living standards of workers, the middle class and poor, and reduced the growing wealth disparity between the rich and everyone else.
Congress raised taxes to the highest level in history on incomes, estates and corporations. During WWII we had an excess profits tax. Against Republican opposition, Roosevelt insisted that workers had the right to unionize, even during wartime. Workers made enough money to not only afford a decent lifestyle, but also to pay taxes.
A well financed government addressed problems that businesses ignored. Despite higher progressive taxes, the wealthy continued to get wealthier, but not nearly as much as they did during the “Roaring Twenties.”
U.S. history from 1980 to today shows how inflation caused by the rich, and not workers, created the lopsided economy we have today. The claim that President Reagan won his war on inflation is an inaccurate half-truth. It’s true that the Consumer Price Index had gone up 13.5% in 1980, the year prior to his taking office. And when he left office in 1988 it went up only 4.14%. But the whole truth is that he won his war on wage inflation. He did not stop stock market inflation, corporate executive and investor income inflation, or real estate inflation.
During the Reagan years, 1981 to 1988, the Dow Jones Average more than doubled, from 875 to 2165. The average cost of a new home more than doubled, from $68,900 to $187.053. The only inflation Reagan stopped was the increasing wages of workers that had grown from 1941 to 1980. For those forty years, workers’ standard of living rose along with America’s elite for a change.
When workers made more money, along with the wealthy, everything got more expensive. Republicans concluded that workers were benefiting too much from the economy. Unions were too strong, wages were too high, and corporate profits weren’t high enough. To them, a good economy was when rising stock and real estate markets caused inflation, not that dreaded “wage inflation.”
That’s still true today. Listen to business news commentators debate whether or not the Federal Reserve is going to raise interest rates to cool down the economy. The number one criterion for judging is, are wages are going up too much — not are stock market or housing prices going up too much.
Of course, we’re always going to have inflation in a growing economy, and those on fixed or low incomes are hurt no matter what the kind of inflation. The Federal Government has to make other economic adjustments, like pegging benefits of programs like Social Security, minimum wage standards, unemployment insurance, and food supplement programs to the inflation rate.