Thursday, February 17, 2005

Keeping the Canaries in the Air

The marked increase in income and wealth disparities in the United States over the last couple of decades makes it appear that we gave grown far more than we actually have. If the enormous paper assets of high-income people were magically redistributed to ordinary people, the value of the dollar would plummet because the economy lacks the productive capacity to back up monies of account with real goods and services. Does anybody think that the U.S. has the medical facilities, equipment, and trained personnel to provide adequate health care to its entire population or enough teachers and schools to educate them all adequately?

I don’t mean to overstate the case. The U.S. is surely a very wealthy country that could probably afford to do better by all of its inhabitants without drastic dislocations. I do think it is likely, however, that those of us who promote more egalitarian tax and income policies should recognize that there is no boundless store of wealth to divvy up. The profits of the corporations are only sky high because they don’t get spent. The very, very wealthy mostly get immunity to risk and social and political power rather than increased consumption out of their privilege. If their share of wealth were diminished, it would hardly increase the prosperity of middling people dollar for dollar. Over a longer period of time, an increase in the spending power of ordinary people would probably tend to increase the real productive capacity of the nation; but in the short run, it might well result in inflation and lower stock prices.

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