Jeffrey Simpson notes that income inequality in Canada is getting worse. According to a Conference Board of Canada report,
The richest group of Canadians, those in the top fifth of income earners, saw their share of national income rise from 1993 to 2008. Within that fortunate group, the biggest gainers were the super rich, the top 1 per cent. And they got even richer not so much from investments but from basic salaries of the kind paid bank presidents and company CEOs.
From 1980 to 2005, the earnings of the top group rose by 16.4 per cent, while middle-income Canadians’ incomes stagnated, and earnings for those in the bottom group slid.
This song is getting tiresome. But, more than that, the data contradicts the conventional wisdom that tax cuts raise all boats. The truth is that they raise all yachts. They certainly do not spur economic growth. Robert Reich has been swimming against the conventional wisdom for some time. Reducing taxes on the wealthy, he writes, merely causes the economy to stagnate:
The engine of the United States economy is consumer spending, which accounts for 70% of the overall economic activity. The middle class simply does not have as much to spend on products, which results in less products and services being sold, which leads businesses to lay off more of the middle class due to lack of demand. This system creates a cycle as the laid off workers have less to spend leading to even less demand.
And this is nothing new. Reich goes back to the 1920's, which were devoted to the same fiscal priorities:
President Calvin Coolidge slashed taxes on the highest income earners. At the same time he pursued anti-union policies that reduced the bargaining leverage of blue-collar workers, resulting in lower wages for them. The only way most Americans could maintain their slice of the pie was to go deeper into debt. Between 1913 and 1928, the ratio of private credit to the total national economy nearly doubled.
The mounting debt could not be sustained. The collapse began with the Great Crash but continued for a dozen years. Why? When debt financing was no longer available to them, Americans could no longer buy nearly as much of the goods and services they were creating in factories and offices. The immediate result was mass layoffs, leaving Americans with even less money. The longer-term result was continued economic depression.
Despite that history, successive American governments have repeated the same fiscal folly. Stephen Harper is devoted to the same failed economic model. He won election telling us that corporate tax cuts created jobs. The data prove that his claim is simply not true. Worse, the repetition of those failed policies is analogous to the patient in the asylum who claims that -- all facts to the contrary -- he is Napoleon.