Democratic presidential candidate Joe Biden speaks in Tampa, Florida on September 15, 2020 during a roundtable discussion with Tampa-area veterans and military families.
Jim Watson | AFP | Getty Images
Joe Biden’s anti-poverty plan to expand the child tax credit suggests that his potential presidency would likely mean a White House more focused on progressive economic policies than those seen during the Obama and Clinton years.
Aimed at reducing childhood poverty rates, Biden’s proposed expansion would be dramatic and open the allowance to families who would otherwise fail to qualify. It would increase a family’s annual, per-child credit to $3,000 from $2,000 and would be awarded in installments each month instead of the current springtime lump sum. Children under age 6 would be credited $3,600.
“You saw in 2009, the Obama-Biden administration did an expansion of the child tax credit then, and it was an important expansion,” said Seth Hanlon, special assistant for economic policy to then-President Barack Obama. “But it was more incremental, whereas this is more transformative.”
The prospective tax credit overhaul, included in a broader Biden campaign tax plan released on Sept. 17, comes as millions of Americans struggle to find employment or keep their small businesses afloat due to the Covid-19 pandemic. Though jobless figures slowly improved throughout the summer, economists say it could take years for the unemployment rate to drop from its current 8.4% back to pre-coronavirus levels, especially as jobless claims continue to exceed expectations into the fall.
The economic hardship has not been evenly distributed. Low-income workers have suffered some of the worst employment losses that threaten to exacerbate poverty for those already most at risk.
Between January and July, employment rates among U.S. workers in the bottom wage quartile (those who make less than $27,000) decreased by 16.1% compared with more modest declines of 5.3% for middle-wage workers ($27,000 – $60,000) and 1.6% for high-wage workers (greater than $60,000), according to tracktherecovery.org.
To be sure, President Donald Trump’s Tax Cuts and Jobs Act did accomplish something similar in bumping the child tax credit from $1,000 to $2,000 and reducing the income threshold for claiming it to $2,500. The law is perhaps best known on Wall Street for reducing the corporate tax rate from 35% to 21% and capping the state and local tax deduction at $10,000.
Neither the Biden nor Trump campaigns responded to CNBC’s request for comment.
Progressive proponents of Biden’s plan say its most exciting change is extension of the credit to families making less than $2,500 per year. Under current law, households must earn at least $2,500 per year to qualify for the credit since those making less don’t have tax liability.
That would mean an American parent without taxable income — including those who lost their job as a result of the pandemic — would nonetheless qualify for the credit.
Sen. Michael Bennet speaks in the second Democratic presidential primary debate, hosted by NBC News, June 27, 2019.
Saul Loeb | AFP | Getty Images
Biden’s big-ticket plan is based on a bill called the American Family Act, a piece of legislation introduced by Sens. Michael Bennet, D-Colo., and Sherrod Brown, D-Ohio, in 2017 as a counter to Trump’s tax overhaul.
The American Family Act has support from virtually every Democrat in the Senate including Biden’s running mate, Sen. Kamala Harris. Progressive leaders Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., also support the bill, almost guaranteeing its odds of passage if Democrats manage to take control of the Senate in the 2020 elections.
Hanlon said Biden’s plan doesn’t make the tax credit changes permanent, but he and other Democrats would favor doing so.
The AFA’s fact sheet says the credit would be expanded “as long as economic conditions require it,” said Hanlon, who now works for the left-leaning Center for American Progress. But “notwithstanding the pandemic, which of course makes it more urgent, it certainly should be a permanent priority.”
“It’s really a game changer for low-income families,” he added.
Research conducted by the Columbia University Center on Poverty and Social Policy and touted by the bill’s drafters finds that that AFA would reduce the number of children in poverty by 4 million (from 14.8% to 9.5%) and the number of kids in deep poverty by 1.6 million (from 4.6% to 2.4%).
Debt and growth
Longtime Biden advisor Jared Bernstein, for example, touted the AFA in March 2019 for including more families and expanding the credit to 27 million kids who do not get the full credit.
“Underinvesting in kids is not just a cost borne by their families. It is a cost borne by all of us,” Bernstein wrote in a Washington Post op-ed last year. “Children who grow up in poverty face stressors with lasting negative effects, for themselves and for the rest of us (e.g., less educational attainment, reduced earnings, worse health outcomes).”
“The AFA’s extra credit for young children is thus a particularly attractive attribute, as providing such resources has been shown to improve adult outcomes of poor children,” he added.
Bernstein and other Democratic economists have for years pushed back on a long-held belief that programs that reduce income or wealth inequality come at a cost of shrinking the overall economic “pie” while also ballooning the national debt.
Politicians in both parties appear less concerned about the level of national debt than they did even a few years ago. Senate Majority Leader Mitch McConnell, who has weighed in against stimulus packages in the past, himself backed a trillion-dollar stimulus plan in July amid an effort to help the U.S. economy through the pandemic. Trump signed his hallmark tax cuts at the end of 2017, when the economy was humming with the unemployment rate at 4.1% and GDP growth at an annualized rate of 3.9%.
Even so, it remains unlikely the Senate GOP would back Biden’s economic proposals. Nevertheless, Democrats argue that programs designed to assist the lower and middle classes are actually a positive for the U.S. economy over time.
Heather Boushey, who is reportedly advising the Biden campaign and is CEO of the Washington Center for Equitable Growth, makes similar arguments.
“Some argue that focusing on inequality is misplaced, and that the most important goal is to grow the pie and just to focus on growth. To be very clear, the empirical evidence from the economics profession shows that this is wrong,” Boushey told the House Budget Committee last September.
“Our inequality-filled economy now grows slower than it did when we were less unequal. Over the past few decades we have grown at an annual pace of about 1.3%, compared to a larger 1.7% in the 1960s and 1970s,” she added at the time. “There is a large and growing body of research that shows that we cannot create strong or broadly shared economic gains through a policy agenda that presumes that growth follows from allowing those at the top to reap the bulk of the gains.”
Pete Holt, the owner for the past decade, said furlough payments to staff from the government were a “godsend.” But ultimately, it was the landlord’s decision to waive rent during the lockdown that allowed the business to keep going.
“That saved us from complete destruction,” Holt said.
Those may not sound like major changes. But for struggling pubs, it could be the final nail in the coffin. Industry groups say shorter service and increased costs put thousands of jobs at risk, while threatening an institution that is at the heart of British life.
“I think this will be the straw that breaks the camel’s back for many,” Tim Martin, founder and chairman of the Wetherspoon pub chain, told CNN Business.
‘The cornerstone of British society’
“The pub is the cornerstone of British society, really,” said Pete Brown, author of “The Pub: A Cultural Institution.” “It’s so much more than a place where you can go and get a drink.”
That meant that when the UK government ordered all pubs closed in March — for the first time in the country’s history — many Britons were rattled. Pubs stayed open during World War I and World War II to boost morale.
“I do accept that what we’re doing is extraordinary,” Prime Minister Boris Johnson said at a news conference. “We’re taking away the ancient, inalienable right of free-born people of the United Kingdom to go to the pub, and I can understand how people feel about that.”
Roughly 90% of the country’s remaining pubs have reopened since the government gave the green light on July 4, according to an analysis by the consultancy CGA. But there’s been deep scarring.
“The pubs suffered a brutal shock when they were closed with no notice,” Wetherspoon’s Martin said. “The way it was done caused many problems and caused tens of millions of pounds of lost stock.”
Holt of the Southampton Arms said he’s “very worried” about the new restrictions. Mandatory table service, he said, will force him to increase the number of people working shifts, raising labor costs, while having to shut early will mean losing valuable business.
“We’re already struggling to break even,” he said. “Without further support from the landlord, it’s going to be impossible.”
Darren Wilton, owner of the Old Neptune in Whitstable, said the summer has been busy. The pub, which is on the beach, has plenty of outdoor space, and has been helped by months of good weather. But he’s worried about the fall and winter.
“It’s going to be devastating for us and a lot of other businesses,” Wilton said. He noted that the interior of the Old Neptune is not designed for social distancing. “We had a little room inside, now we have even less room. People can’t come in and sit at the bar.”
In addition to the 10:00 p.m. closing time and required table service, pubs in England face new rules on how to register customers at the door. Patrons and workers are also now required by law to wear masks inside unless they’re eating or drinking.
The Johnson government has defended the new restrictions as crucial given the alarming trajectory of coronavirus cases.
This week, the country’s chief medical officer and chief scientific adviser told the public that the number of infections was doubling every seven days, and warned that without further intervention, the United Kingdom could see infections rise from the 6,178 recorded on Wednesday to 50,000 a day in October.
Pub owners acknowledge that the health crisis is worsening. But many argue that targeting them is misguided, noting that it could just lead to more people congregating in private spaces like homes.
“I don’t think many scientists believe that having a curfew will bring the virus under control,” Wetherspoon’s Martin said. “It’s illogical.”
Emma McClarkin, chief executive of the British Beer and Pub Association, said in a statement that there “seems to be little available evidence that pubs, with their strict adherence to government guidelines, are unsafe.”
“Pubs were struggling to break even before today and these latest restrictions will push some to breaking point,” she said. “Removing a key trading hour on top of fragile consumer confidence and the reduced capacity pubs already face will put thousands more pubs and jobs at risk.”
So far, many pubs have been kept afloat by help from the government, which has offered one-time £10,000 ($12,728) grants to small businesses and tax relief. Conscious of the impact of the fresh measures, finance minister Rishi Sunak on Thursday announced new wage subsidies and loan programs, and said that a 15% sales tax cut for the hospitality sector would be extended through March 2021.
Thanks to such actions, permanent closures are actually pacing behind 2019, according to real estate adviser Altus Group. But the number of pubs expected to close their doors for good is now poised to accelerate — especially given the uncertainty around Christmas, a crucial season for bookings.
“We aren’t looking at a death of the pub here,” Brown, the historian, said. “But we are talking about a thinning of the numbers.”
The number of first-time filers for unemployment benefits were slightly higher than expected last week as the labor market continues its sluggish recovery from the coronavirus pandemic.
The Labor Department reported Thursday that initial jobless claims for the week ending Sept. 19 came in at 870,000. Economists polled by Dow Jones expected first-time claims to come in at 850,000, down slightly from the 860,000 claims reported for the previous week.
New York and Georgia saw the biggest week-over-week increases in initial claims, the department said. Claims in New York rose by more than 9,000 last week and first-time filers in Georgia came jumped by more than 6,000.
Thursday’s data comes as U.S. lawmakers struggle to move forward with a new fiscal stimulus package, something economists and the Federal Reserve argue is needed for the economic recovery to continue.
Continuing claims, which include those receiving unemployment benefits for at least two straight weeks, decreased by 167,000 to 12.58 million during the week ending Sept. 12. Continuing claims data is delayed by one week.
This is breaking news. Please check back for updates.
J.P. Morgan Chase CEO Jamie Dimon
“A wealth tax is almost impossible to do,” he told CNBC-TV18 at the J.P. Morgan India summit on Tuesday when he was asked whether he’s in favor of such a proposal put forth by several Democrats.
“I’m not against having higher tax on the wealthy. But I think that you do that through their income as opposed to, you know, calculate wealth which becomes extremely complicated, legalistic, bureaucratic, regulatory, and people find a million ways around it. I would just tax income,” he said, suggesting that it’s harder to cheat on such a tax because income is “given.”
The wealthy in the U.S. have started preparing for tax increases that are likely to come in the coming years as government deficits at both state and federal levels rose due to the Covid-19 pandemic. Governments have increased spending to manage the health and economic crises, which at the same time caused their revenue to fall.
A study published last year by the Organisation for Economic Co-operation and Development found that the U.S. lost more tax revenue than any other developed country in 2018, largely due to U.S. President Donald Trump’s tax cuts.
Democratic presidential nominee Joe Biden had said that he would roll back most of Trump’s multitrillion-dollar tax cuts — which some reports said benefited businesses and higher-income individuals the most.
But Dimon said the president’s tax policies are among some of the “very good things” that he’s done for the U.S. economy. He explained that the U.S. has traditionally been a “red tape society” with a bureaucracy that “slows down a lot of business.”
“And I remind people, the world, when you slow down the economy, you are hurting the disadvantaged more than anybody else,” he said.
Dimon also said that governments should put more thought into how taxes are structured so that the economy can grow.
“There’re taxes which will slow down growth, like taxes on capital formation, or labor; and there’re taxes which will not affect growth like taxes on, you know, well-to-do people like me,” said Dimon.
“And I just think there should be far more thought about taxation … if you want an active, healthy growing economy.”
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a House Financial Services Committee hearing in Washington, D.C., on Tuesday, Feb. 11, 2020.
Andrew Harrer | Bloomberg | Getty Images
Federal Reserve Chairman Jerome Powell pledged continued support for an economy that he said has shown substantial improvement but still needs more work.
In remarks the central bank leader will deliver Tuesday to the House Financial Services Committee, he reiterated the Fed’s commitment to helping the economy through the coronavirus pandemic and outlined what’s been done so far.
“We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy,” Powell said in his prepared testimony. The appearance Tuesday is one of three Powell will make on Capitol Hill this week.
The Fed has cut short-term interest rates to near zero and launched 13 lending and liquidity programs that have helped ease market stresses and provided credit to businesses. In addition, the Federal Open Market Committee last week committed to not raising interest rates until inflation rises above 2%.
While Powell said the accommodative policies will continue as needed, he added that the economy has improved.
“Economic activity has picked up from its depressed second-quarter level, when much of the economy was shut down to stem the spread of the virus. Many economic indicators show marked improvement,” he said. “Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.”
The Fed’s support programs have the potential to provide more than $2 trillion in various levels of funding, though same have been used only lightly.
The Main Street Lending Program, geared towards small- and medium-sized businesses, has just $2 billion or so committed though it has the potential for $600 billion. A facility in which the Fed can purchase corporate bonds on the primary market hasn’t been used at all.
Still, Powell said the facilities overall have unleashed about half their potential funding and will be at the ready should market stresses re-emerge.
“Our economy will recover fully from this difficult period,” he said. “We remain committed to using our full range of tools to support the economy for as long as is needed.”
The U.S. Capitol building stands in Washington, D.C., on Tuesday, Sept. 8, 2020.
Stefani Reynolds | Bloomberg | Getty Images
Government and business debt soared in the second quarter as the U.S. dealt with the coronavirus pandemic, even as personal net worth rose and consumer credit plunged at a record level.
A Federal Reserve report released Monday showed the total household balance sheet in the U.S. rose to nearly $119 trillion in the April-through-June period, a 6.8% increase from the first quarter.
The gain in net worth was driven almost exclusively by the stock market.
Thanks in large part to unprecedented fiscal and monetary stimulus, the S&P 500 gained 20% during the quarter. That in turn led to a $5.7 trillion gain in net worth, or 75% of the total increase. Real estate contributed $500 million.
As financial assets increased, debt, at least at the household level, went nowhere.
In fact, consumer credit tumbled at a post-World War II record 6.6% annual pace thanks in large part to a decline in credit card balances to $953.8 billion from $1.02 trillion. Student loan debt was little changed at $1.68 trillion while auto loans edged higher to just shy of $1.2 trillion.
That came as the federal government and businesses continued to ratchet up debt. In all, domestic nonfinancial debt totaled $59.3 trillion.
Federal government debt exploded at a 58.9% pace as Congress passed the CARES Act to support an economy that had gone into lockdown at the end of the first quarter to combat the Covid-19 spread.
Nonfinancial business debt rose by 14%, which actually was below the 18.4% rise in Q1 but still well above any pre-pandemic level going back to at least 1980. State government rose by 3.5%, its quickest since 2009.
The data comes from the Fed’s quarterly Financial Accounts survey, previously known as the flow of funds.
It’s emblematic of today’s capitalist society that groups of people get left behind, and it’s the job of policy makers to try to fix that.
This isn’t the first time capitalism is in crisis. In the 1950s — America’s so-called golden age — there were concerns about automation eliminating jobs and people falling through the cracks of the government’s safety net (sound familiar?). And in 2008, corporate greed came under the microscope following the financial crisis.
It will be hard to sweep all of America’s economic issues under the rug again when the pandemic is over.
“We are pregnant with change,” said MIT economics professor Daron Acemoglu.
Here are three ways the pandemic might change capitalism forever:
A new social safety net
The pandemic exposed the cracks in America’s social safety net. Enter the welfare state 2.0, which could be more attuned to workers’ needs, experts said.
“We’re in a moment where the pendulum is [swinging] towards a more favorable view of what government can do,” Glickman said.
Better-designed unemployment benefits, programs to help people back into the workforce and more affordable housing could help ease the burden of this crisis for the weakest members of the economy.
Paying to replace these workers’ wages won’t come cheap, and will likely mean that taxes will have to rise while still staying low enough not to stifle business, economists agree. It’s a tightrope.
Globalization and automation challenge the manufacturing sector
Globalization goes hand in hand with capitalism. It has changed the way money and people move around the world.
A big challenge for policy makers is to deal with how that has affected workers.
Welfare isn’t only about benefits. It also extends to education and health care. In a world where machines increasingly take over people’s jobs, educating the next generation so their skills match what’s needed is important.
More debt than ever before
Capitalism isn’t only about how a country treats its people and workers, it’s also about how it treats its money.
Debt might be one of the most prominent characteristics of today’s capitalism, said Christine Desan, professor of law at Harvard.
In the post-pandemic world, policy makers will either have to accept living with enormous debt burdens or address a complete overhaul of the system in place.
What comes next? How much further do we have until our jobs, businesses and finances are fully recovered?
The good news: That’s much improved from the darkest days when economic activity hit a low point in April. The bad news: There’s still a long way to go.
In the latest week, the Back-to-Normal Index fell slightly. In other words, the recovery could now be heading in the wrong direction.
A stalled recovery
It slowly improved in May and June as coronavirus cases started moderating, unemployment claims began falling and some states started lifting restrictions on businesses.
But after that, the momentum stalled.
As coronavirus cases surged in some places, states backtracked on reopening plans. For the last three months, the index shows the economy has largely gone sideways. It reached a post-pandemic high of 80% over Labor Day weekend before slumping again to 76%.
“I think it’s pretty clear the Back-to-Normal Index indicates this is not a V-shaped recovery,” said Mark Zandi, chief economist at Moody’s Analytics. “Six months in, we’re still a long, long way from getting back to normal.”
An economy operating that far below “normal” translates into hardship for millions of Americans and businesses.
Against this dismal backdrop there are only a few bright spots: stocks, housing and e-commerce.
The few bright spots
That said, it’s unclear how much longer strength in the real estate market can continue. Mortgage applications, which led much of the recovery earlier in the summer, fell during the week ending September 11.
“The more businesses that fail, the longer it will before we get back to normal,” Zandi said.” it’s a scarring effect on the economy, a structural problem that will become a lot worse.”
Where we go from here
The economic recovery is expected to be a “long slog,” Zandi said, estimating that by the end of the year, the US economy will still be down about 10 million jobs from its pre-pandemic peak. He doesn’t think America will return to full employment until the second half of 2023.
That sobering forecast depends on two factors: the virus doesn’t get worse and fiscal policy comes to the rescue.
Likewise, Moody’s Analytics expects that without a fiscal rescue package, including more support for small businesses and the unemployed, the Back-to-Normal Index will start backsliding.
“Getting from 60% to 80% is going to be a lot easier than getting back to 100% — now the hard work begins,” Zandi said.
Olivia Michael | CNBC
St. Louis Federal Reserve President James Bullard offered an optimistic look on the U.S. economy, with “off the charts” growth that will help lift inflation.
Bullard also said he sees the unemployment rate falling to 6.5% by the end of the year, an estimate well below the median projection of 7.6% that his Fed colleagues released earlier this week. Unemployment in August was 8.4%, down from the pandemic peak of 14.7%.
“This is the biggest growth quarter of all time in the U.S.,” he said Friday during a moderated discussion with the Boeing Center for Supply Chain Innovation. “It looks like 30% at an annual rate. Crazy number, way off the charts compared to anything we’re used to in U.S. post-war macroeconomic history.”
That growth, Bullard added, will help the Fed meet its 2% inflation mandate.
Following this week’s Federal Open Market Committee meeting, officials released a statement expressing their commitment to a goal that the central bank has missed since setting the target in 2012.
Under the initiative, the Fed has pledged not to raise rates until inflation has surpassed 2%, even if unemployment slides to a level normally associated with pricing pressures.
“I think this will be quite successful,” Bullard said. “I actually think we’re at a moment where you may see some inflation now in in the future from several sources.”
He cited “less preemptive policies from central banks” as well as the large government budget deficits often associated with inflation and the economy growing at a rate “that doesn’t happen every day.”
U.S. gross domestic product contracted at a 31.7% annualized pace in the second quarter, owing to the unprecedented economic shutdowns instituted to slow the coronavirus pandemic. The Atlanta Fed’s GDPNow tracker is showing the potential for a 32% growth rate in Q3.
A Kelly Center for Hunger Relief volunteer sorts through food for distribution as residents in vehicles wait in line at a church in El Paso, Texas, on July 17.
Joel Angel Juarez/Bloomberg via Getty Images
Are you in the top 1%, 5% or 10% of the U.S. income and wealth scale? If you are, congratulations on being rich and economically successful. Good for you too for not being a big part of our current economic challenges. You’re protected from the headwinds affecting the other 90% of your fellow citizens.
It’s easy to hate the rich for all that they have and all that you don’t, but the rich aren’t the problem.
Most of the rich were rich 10 years ago and have become richer. Most of the rich were rich 10 years ago and have become richer. The rich are good at being rich; they buy expensive houses, cars, planes, and other toys. They hire people and create some jobs but not enough to have a discernible impact in an economy the size of the U.S. A few Americans have been able to enter this top tier, but not nearly enough.
Since the financial crisis of 2008, the Federal Reserve and federal government have engineered economic rescue efforts consisting of large deficit spending and liquidity injections totaling trillions of dollars. This drenching downpour of cash successfully staved off economic collapse and deeper financial tragedies. The government gets high marks for disaster aversion.
But, while the deficit spending and interest-rate suppression kept the ship afloat, they didn’t do much to get the ship moving very well, or improve the lots of the steerage passengers and crew. Yes, the first-class passengers are fine, were fine, and have almost always been fine. They have all been assigned a lifeboat. But the ship has not been safely steered clear from icebergs.
The U.S. economy is the largest in the world, and nearly 70% of it is driven by consumer spending. Billionaires are a fraction of the top 1%, and they literally can’t spend all their money. There is so much money in so few hands at the very top that they simply can’t spend enough of it to make a difference to an economy as large as America’s. The problem is that the poor and middle class don’t have enough money.
If your economy depends on consumer spending, the consumer needs money to spend. If your consumer economy is to increase, the consumers need to have more money to spend. The government’s approach that saved our economy has created a surge in asset prices that has made rich people richer but hasn’t done much for the average American family.
By the fourth quarter of 2019, there were encouraging signs.
Unemployment was below 4% and there were more job openings than people seeking jobs. When employers compete to get workers, they have to pay more for them. Wage gains, while inflationary, are a crucial step in getting more money into the hands of a larger number of Americans.
This additional money in more pockets creates demand for more stuff and requires increased manufacturing and hiring and results in economic expansion. This is a great formula for economic renaissance. But this hasn’t happened. It hasn’t happened because Milton Friedman was wrong.
The inflation problem
Widely acknowledged as one of the greatest economists ever, Friedman said “inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” We have had more than 10 years of rapidly and steadily increasing money supply, but we haven’t had any meaningful inflation.
Therefore, Farr’s addendum to Friedman (I can’t believe I just wrote that) is that unless the increase of money leads to an increase in demand, there is no inflation (or for that matter, significant economic growth.)
The government’s monetary and fiscal programs that saved the economy from collapse are precisely those that led to the ever-increasing wealth gap. The middle class and poor are stuck and struggling while the wealthy become wealthier.
The popular political response is to blame and tax the rich. It appeals to the great American paradox of dreaming to be rich while simultaneously hating everyone who already is. The rich aren’t the problem, and it’s not their fault. This is government policy that began on a good path, accomplished meaningful and important goals, and lost its way.
The policy is the problem, and it needs to change.
Most of the money that has been spent just this year resulted in temporary relief for those who received it and very little in terms of sustained or long-term effect. The relief was needed, but without ongoing stimulus to spur growth, the impacts fade quickly.
Had a portion of the government funding been spent on repairing all of the bridges and highways in the U.S., people would have been hired by the hundreds of thousands; concrete, steel and other materials would have been purchased; and those resulting structures would have increased commerce and added to economic growth. The same can be said for longer-term investments such as energy infrastructure, education, and research and development.
I’m not arguing against relief; I’m arguing that stimulus that doesn’t spur long term growth isn’t stimulus at all. Politicians on both sides of the aisle need to better understand what is keeping the ship afloat, versus what will get it moving again.
The poor and middle class are the crux of the American economic dilemma, and until we are able to sustainably increase their lot, our economy will continue to suffer.
Taxing the rich may feel good, but it won’t raise enough money to dent this economic ill. I’m not arguing against higher taxes for the rich, but I am looking at the numbers.
Taxes on the wealthy could certainly be higher. Taxing the rich will provide more funds to pay for the government and to pay for interest on the government’s debt. But unless those monies are deployed such that they can create jobs and growth, the problem of the trapped poor and middle class will remain unchanged and may worsen.
Until employment and wages increase, the U.S. economy will remain at best bogged down and at worst digging a deeper hole for all of us, our children and grandchildren.
—CNBC contributor Michael Farr is CEO of Farr, Miller and Washington. See disclosure.