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The more the ultra-rich prosper, the less they’re burdened with taxes, the greater the benefits for society as a whole. If you’re familiar with Republican economic theory of the past 40 years, you’ve probably heard this line of reasoning. In fact, just the opposite is true.
Take it from the world’s third richest man, Warren Buffett, who recently noted that between 1982 and 2017, “the wealth of the 400 [richest people in America] increased 29-fold—from $93 billion to $2.7 trillion—while many millions of hardworking citizens remained stuck on an economic treadmill. During this period, the tsunami of wealth didn’t trickle down. It surged upward.”
The reality is the United States is now home to some of the worst income inequality in the developed world, and thanks to the recent passage of the Tax Cuts and Jobs Act, this wealth gap will grow exponentially wider.
Lowering the corporate tax rate from 35 to 21 percent, the GOP’s massive overhaul of U.S. tax law exemplifies trickle-down economics at its worst. Trump supporters insist that corporations will generously share their gains with employees, but according to economist Robert Reich, “almost all the extra money is going into stock buybacks” rather than wage increases. Because the richest 10 percent now own 84 percent of stock shares in the U.S., he emphasizes, this will do little to nothing to improve the prospects of most Americans.
According to the firm Birinyi Associates, a record $170.8 billion worth of buybacks and counting have been announced since the president signed these tax cuts into law. Reich has denounced the legislation for creating greater inequality in a country that is already radically unequal.
In 2017, the World Bank’s Gini index, which measures inequality country by country, cited Haiti, South Africa, Botswana, Namibia and the Central African Republic as the world’s five most unequal countries. (The most economically balanced nations include Norway, Ukraine, Slovenia, the Czech Republic and the Slovak Republic.) Gini data also show that measured against other developed countries, the United States is failing its lower and middle-income earners miserably.
Citing the 2015 Gini data of 34 countries, the Organization for Economic Cooperation and Development recently found that the top 10 percent in the United States earned 18.8 times more than the bottom 10 percent. By comparison, the wealthiest 10 percent of Danes, Fins, Belgians, Germans and Australians earned 5.2, 5.5, 5.9, 6.6 and 8.8 times more than the bottom 10 percent respectively. In Mexico, the most economically unequal country in the OECD’s report, the rich earned 30.5 times more than their poorest compatriots.
The 2018 World Inequality Report, compiled by Thomas Piketty and other economists and released in December, also paints a troubling picture of the United States’ wealth distribution. According to the study, the top 1 percent of wage earners went from owning 11 percent of the national income in 1980 to 20 percent in 2016. The bottom 50 percent’s share of the national income dropped from 21 to 13 percent over the same time period. In Western Europe, the 1 percent’s control of national incomes has risen from 10 to 12 percent, while the bottom 50 percent’s share has held steady at 23 percent—undesirable, perhaps, but decidedly more equal.
Although the U.S. remains the largest economy in the world, it is hardly the most inclusive. While Wall Street and Silicon Valley are thriving, OECD data indicate we not only suffer from harsh inequality but some of the highest rates of poverty in the developed world. In 2014, according to organization’s findings, the United States’ poverty rate was 17.2 percent compared to 10.4 percent in the U.K, 9.1 percent in Germany, 9 in Austria, 8.9 percent in the Republic of Ireland, 8.8 percent in Sweden, and 8.6 percent in Switzerland. Even in Greece, perhaps the European country hit hardest by the Great Recession, poverty was slightly lower than the U.S. in 2014, with a rate of 15.1 percent.
As a Republican candidate for president, Trump railed against out-of-touch elites, vowing to “make America great again” and revitalize the American Dream. Yet his administration’s proposed federal budget includes draconian cuts to a long list of social programs, including food stamps, housing and heating assistance. On the campaign trail, Trump insisted he would not touch Medicare, Medicaid or Social Security, but his budget would defund Medicare by $266 billion, Medicaid by $1.1 trillion and Social Security by $72 billion.
What’s more, Trump has opposed raising the national minimum wage significantly, if at all. And by eliminating the Affordable Care Act’s individual mandate, the Tax Cuts and Jobs Act will cause 13 million Americans to lose their health insurance by 2027 and increase premiums by 10 percent, according to the non-partisan Congressional Budget Office. Covered California, an ACA exchange program, has estimated that premiums could increase by as much as 30 percent in the Golden State in 2019.
The Trump administration has done everything possible to exacerbate inequality in the U.S. and undermine what little remains of the New Deal’s progressive policies. Former House Speaker Newt Gingrich has even praised Trump and Republicans in Congress for making “a great effort to break out of the Franklin Delano Roosevelt model.” If the U.S. remains on its current economic trajectory, there won’t be an economic safety net left to shred.