We're not broke

Hat tip to Mike Hall at the AFL-CIO NOW BLOG for posting a link to this eye-opening position paper from the Economic Policy Institute. According to the paper's author, EPI President Larry Mishel

To fully understand the growth trends in income and wealth in recent decades, one must recognize that the growth has been very unequal: households at the top of the scale have seen much faster growth in their incomes and wealth accumulation than have those in the middle or bottom of the distribution. For instance, the top 10% of the income distribution has claimed almost two-thirds of the gains in income since 1979, with the top 1% alone claiming 38.7% of those overall gains. Moreover, the wealth of the median (or ‘typical’) household was lower in 2009 than in 1983, in spite of the 40.3% growth in the average household’s wealth.4 When the median is substantially lower than the average, it indicates very lopsided growth, which has been the case for the past 30 years: there was no growth in wealth for the bottom 80% of households, while those in the top fifth enjoyed a 50% increase.

So if the private sector has grown for the past 30 years (albeit very lopsidedly), and the projections for the next 30 years indicate comparable total income growth for the economy, then what is the story for the public sector?

It is true that all levels of government are facing budget difficulties as a result of falling revenues during the recession. Higher unemployment and depressed economic activity have certainly depressed tax revenues, and past tax cuts at all levels of government have seriously eroded revenues as well. But some policymakers and pundits want to have it both
ways: choke off the revenue stream to governments while slashing budget expenditures. For instance, the current domestic spending cuts proposed by the House of Representatives for this year were smaller than the revenues lost from extending the upper-income Bush tax cuts and the inheritance tax cut legislated last December

In other words, the extremely rich have benefited much more than everybody else from the nation's increase in productivity over the past 30 years. The extremely rich have also enjoyed huge tax cuts. If the rich paid a bit more in taxes, we could afford government programs that help poor and middle-class people. Choosing not to raise taxes on the rich is just that--a choice.

The full EPI report is easy to read and fairly brief. You can see it (and download it) here.