The economic questions on most people’s minds are whether the United States will grow again, whether their lives will ever be materially better and, most of all, whether their children will have a better life than they do.
A Facebook poll taken a few months ago revealed that many had worked hard all their lives, lost significant ground in the recession and were not at all optimistic that their children or grandchildren would have a higher standard of living. Sure, the stock market started the year at, or near, a new high since this terrible financial convulsion first started in 2008. And the official measure of economic growth — gross domestic product — is showing that the economy is moving ahead, leaving the official definition of recession behind us. And yes, the unemployment numbers have made some progress, though hardly a dent in the massive numbers of people searching for work.
But that’s the stuff that economists consider. What matters to most people is the dramatic decline of hope that things will get much better. It’s a generational worry that has many Americans ready to believe that our best times are behind us. Most of us are willing to sacrifice for a good cause — and the best cause for many of us is our children’s future. Right now, it seems cloudy.
Those feelings of despair remind me of accounts of life in the Depression years. The drought and the dust bowl destroyed America’s farm economy, even as the Depression destroyed jobs. Few parents then could anticipate their children would live in a world of jet-age global travel and economic growth. Today’s negative outlook also reminds me of the 1970s, when the effort to fight a war and create a “great society” at the same time resulted in a frightening inflation, then a devastating recession. The stock market had hovered around 700 for a decade, the prime rate went to 20.5 percent and unemployment hit double digits.
At the depths of the economic recession in 1980 – 1982, few would have forecast that within 20 years the Dow would hit 12,000, and interest rates would be in the low single digits, and that an unexpected technology revolution would create unprecedented productivity and economic growth. Yet that’s exactly what the American economy delivered — an economic boom that created jobs and prosperity and hope for the future. And it created wealth.
That’s what we should all be rooting for in 2011: wealth creation.
The politics of envy has never achieved economic growth because it has at its core a desire to redistribute the existing wealth, instead of creating incentives to create growth that can lift an entire society. We are told that there are too many “rich” people. Instead, we should think that there are not enough rich people. Because only wealthy people can pay the taxes that will fill in our budget deficits.
In 2008, the last year for which hard data is available, the top 1 percent of the nation’s adjusted gross income earners earned 20 percent of the total national income. Those are the truly wealthy. And, they paid 38 percent of the nation’s taxes. That year, the top 10 percent of the nation’s AGI earners earned 45.8 percent of the income, but they paid in 69.6 percent of the total taxes paid that year. In fact, the top 50 percent of the nation’s AGI earners earned 87.25 percent of the total income but they paid in 97.30 percent of the total income taxes. (This analysis comes from the Tax Foundation, based on IRS data.)
Think how much good our country could do for its own citizens and for others around the world if we had a growing economy, with more people working — and paying taxes. It’s easy to forget the incredible possibilities that our economy offers — if we all work together to reward ingenuity and create incentives for progress. That applies to bosses as well as workers, to bankers as well as borrowers, to government as well as business.