What’s a ponzi scheme? It’s con in which those who are the first to sign up get all the goodies, and the last to sign up lose money. So what’s the Great American Ponzi Scheme of my title? It’s called our economy.
Look at this graph from the Economic Policy Institute:
Notice how the share of income for everyone except the top 1% of Americans (the Crème de la Crème, as it were) declined between 2001 and 2005. Guess what happened during that time. That’s right, Bush’s grand reform of our tax code, otherwise known as the Economic Growth and Tax Reform Reconciliation Act of 2001 (EGTRRA), was passed, and tax cuts for the wealthiest Americans flowed like a backed up septic tank all across this great land of ours. And the result is what you see above. More for the richest Americans and less for everyone else.
(cont.)
How much did the bottom 90% of Americans lose in the great and wonderful Bush economy? Well, in real terms (i.e., adjusted for inflation) the bottom 90% of American households (including most readers of this blog I imagine) lost an average of $1,293 from 2001 to 2005, or 4.2% of their income in a four year perio. And remember, this was during a period of “economic recovery” from the recession of 2000. Indeed, the recovery was a very narrow one, since it lifted the yachts of the wealthy while punching holes in the rowboats of everyone else’s economic ship.
Here’s another graphic from EPI showing the change in income among various Amewrican just from 2004 to 2005 to clarify this point for those who like to see data presented visually:
As you can see, everyone at the 90th percentile and below lost income between 2004 and 2005. There was a slight gain for those up to the 95 percentile (2.2.%), and even bigger gain for those between the 95th and 99th percentiles (4.4.%) an even larger gain for those whose incomes fell between the 99th and the 99.5th percentiles, and for the top .05 (or one half of one percent) of all Americans a hefty 16% raise in their incomes over a period of just one year! That’s a pretty stunning accomplishment. And please note, this occurred the the year before the rise of gasoline prices to over $3 a gallon.
Now I’m not an economist, but for today I’ll play one on this blog. It seems to me that such gross income disparities between the very wealthy and everyone else is not a good thing for a robust economy. And the recent turmoil in the mortgage market, the rise of personal debt and the increase in personal bankruptcies are all data points that support my theory. And if you want a little history, just look at the era prior to the Great Depression, a period when the chasm between the incomes of the rich and the rest of America was just as vast as it is today, and mortgage foreclosures were an all too common occurrence.
Now imagine what will happen once the inevitable recession hits, because, as Bush is always reminding us, our economy is very “strong” thanks to his tax cuts. And I suppose it is strong, if you look at it from a top-down standpoint. However, once you dig a little past the “surface numbers” you find an economy that is reliant upon huge deficit spending by the Federal Government (all that Republican backed privatization and defense contracts for the war, not to mention corporate welfare such as the Medicare Prescription Drug Farce which was oh so helpful to the bottom line of Big Pharma), and the purchase of massive amounts of US Treasury debt instruments by the Japanese and Chinese. It sure isn’t based on a lot of great jobs that have been created; quite the cont5rary. So should the Chinese and Japanese ever stop buying our debt the entire edifice of the “Bush recovery” will collapse, and we will most likely experience the worst economy any of us (aside from our parents or grandparents who lived through the Great Depression) have ever seen.
In the meantime, Bush’s economic policies will continue to look great if you are a multi-millionaire — but for everyone else, behind on your rent or mortgage payments, struggling to put your kids through college or lacking health care coverage? Not so much.
