Neopergoss raises a great point, but I maintain that the unemployment rate is the one overriding element of the entire US society today. The income gap is an issue big enough to deserve its own message board, but the question at hand is how to stimulate the economy and thus reduce unemployment (which would, by itself, go a ways toward restoring the income gap).
So, time to disprove the conservative theory about tax cuts boosting the economy. This is a little bit complex.
Tax cuts really do boost the economy -- in the short term. However, in the medium and long terms, they do more damage to the economy than they do harm. The classic conservative argument for tax cuts is that they act to "starve the beast" -- in other words, they force government to cut spending. As Ronald Reagan put it,
Well, if you’ve got a kid that’s extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker.
The problem is that, according to Two of the nation's leading economists (
http://elsa.berkeley.edu/~dromer/papers/draft509.pdf) -- the only ones to have really studied the issue -- "starve the beast"
doesn't work. Inevitably, what happens is that taxes get cut, and then no one has the balls to actually cut any programs 'for realz', and so in order to pay for everything it wants to do, the government uses deficit spending to make up the difference.
You can tell that this happens simply by looking at the effect that conservative economics have on the national debt via this cute little chart from Wikipedia:
The effect is very literally that wealthy people get wealthier because the government borrows money from the future's middle class people rather than getting it from the wealthy in the first place. And yes, some small portion of that additional wealth does indeed get spent on investments into business, which creates jobs. And yes, smaller taxes do in fact reduce the transction-eliminating effect that I mentioned in my last post.
BUT -- when you take money away from middle class people, and I know this sounds obvious, but when you take money away from middle class people, they
have less money. And every economist in America will tell you that it's the middle class' spending that drives the American economy.
So, the chain of cause and effect goes like this:
Tax cuts trigger deficit spending which takes money away from the middle class which then has no money to spend which tanks the economy which causes conservatives to scream for more tax cuts which trigger deficit spending which takes money away from the middle class.......and the only people who benefit from this in any way are the wealthy, who pocket the extra money from the tax cuts and don't even notice the recession because hey, they already have everything they need.
In short, spending money on the wealthy (via tax cuts) has a multiplier effect, much like spending money on the poor does -- only when you give it to the wealthy, the multiplier effect is
less than one, because wealthy people typically don't spend all of every dollar they're given. They save it; that's usually how they got wealthy in the first place. Money that goes into savings, foreign markets, or long-term bonds doesn't affect the economy today. So, while you get $1.60 in economic growth for every dollar you give a poor person, you'd be lucky to see $.80 in economic growth from every dollar you give a rich person.
Add to that the inherent economic slowdown caused by deficit spending -- which both parties are using to fund their respective 'solutions' -- and you start to get a hold of the long-term picture. It's kind of like a rocket trying to escape gravity -- if you're not going fast enough, eventually, gravity will win and you'll crash, hard. Growth via unemployment benefits is at least twice as "fast" as growth via tax cuts...and gravity is a motherf***er.
