I'm going to talk a little bit about two big priorities: one, how to keep this economy strong so people can make a living; and secondly, how this country needs to stay resolved and firm in protecting the security of our country. (Applause.) And I appreciate you giving me a chance to come over and visit.
Let me talk about how to keep this economy growing. You know, one of the main jobs of government is to create the conditions for economic growth. A main job of government is not to try to create wealth. The fundamental question we've got to ask here in Washington is, what do we need to do to encourage investment and risk-takers, and to encourage entrepreneurship? And I believe the heart of good economic policy is keeping people's taxes low. (Applause.)
The reason I say that is there's a fundamental debate in Washington, when you really get down to it, and the debate is who best to spend your money. And I believe a cattleman can spend their money better than the government can. Now, obviously, we need some amount of money here, and that's called setting priorities. But beyond that, the best way to keep this economy growing is to let you keep more of your own tax money. The tax cuts we passed are working.
And for cattle ranchers and others of the Bush family's friends, cronies, and campaign contributors, and for everyone else in the top 1%, the tax cuts ARE working -- to concentrate more wealth in their hands while making the poor even poorer. If you loved 1928, you love 2007:
Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.
The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.
While total reported income in the United States increased almost 9 percent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent.
The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.
The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.
Prof. Emmanuel Saez, the University of California, Berkeley, economist who analyzed the Internal Revenue Service data with Prof. Thomas Piketty of the Paris School of Economics, said such growing disparities were significant in terms of social and political stability.
“If the economy is growing but only a few are enjoying the benefits, it goes to our sense of fairness,” Professor Saez said. “It can have important political consequences.”
Last year, according to data from other sources, incomes for average Americans increased for the first time in several years. But because those at the top rely heavily on the stock market and business profits for their income, both of which were strong last year, it is likely that the disparities in 2005 are the same or larger now, Professor Saez said.
He noted that the analysis was based on preliminary data and that the highest-income Americans were more likely than others to file their returns late, so his data might understate the growth in inequality.
The disparities may be even greater for another reason. The Internal Revenue Service estimates that it is able to accurately tax 99 percent of wage income but that it captures only about 70 percent of business and investment income, most of which flows to upper-income individuals, because not everybody accurately reports such figures.
The Bush administration argued that its tax policies, despite cuts that benefited those at the top more than others, had not added to the widening gap but “made the tax code more progressive, not less.” Brookly McLaughlin, the chief Treasury Department spokeswoman, said that this year “the share of income taxes paid by lower-income taxpayers will be lower than it would have been without the tax relief, while the share of income taxes for higher-income taxpayers will be higher.”
Treasury Secretary Henry M. Paulson Jr., she noted, has acknowledged that income disparities have increased, but, along with a “solid consensus” of experts, attributed that shift largely to “the rapid pace of technological change has been a major driver in the decades-long widening of the income gap in the United States."
Others argued that public policies had played a role in the shift. Robert Greenstein, executive director of the Center on Budget and Policy Priorities, an advocacy group for the poor, said that the data understates the widening disparity between the top 1 percent and the rest of the country.
He said that in addition to rising incomes and reduced taxes, the equation should take into account cuts in fringe benefits to workers and in government services that middle-class and poor Americans rely on more than the affluent. These include health care, child care and education spending.
“The nation faces some very tough choices in coming years,” he said. “That such a large share of the income gains are going to the very top, at a minimum, raises serious questions about continuing to provide tax cuts averaging over $150,000 a year to people making more than a million dollars a year, while saying we do not have enough money” to provide health insurance to 47 million Americans and cutting education benefits.
A major issue likely to be debated in Congress in the year ahead is whether reversing the Bush tax cuts would slow investment and, if so, how much that would cost the economy.
This notion that businesses need huge government incentives to do what businesses do, while workers should have no incentive to become educated because the jobs for the more educated just aren't there, is fascinating to me. Will businesses only invest and expand if the government shovels cash into CEO pockets? And if so, isn't that a fundamental problem with the capitalist model?
If 2007 resembles 1928, then watch out for 2008.
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