Bill O’Reilly spent some time on his show this week talking about why the economy is still growing so slowly. I’ll list his talking points and whether or not they’re true or false:
1) The economy is weak because consumer spending is low, which is a really dumb way of saying there’s not enough demand in the economy. TRUE
2) Consumer spending is low because disposable income is low. TRUE
3) Disposable income is low because taxes are high. FALSE
For an anti-tax nut like O’Reilly, all problems in the economy can ultimately be laid at the feet of the tax man. The only problem with this is that he’s 100% wrong. The real issue isn’t taxation, it’s income stagnation. While CEO pay has increased more than 800% since 1978, the bottom 80% of the country has seen a net increase of 5.4%. Simply put, those at the top have done extremely well since 1978 while the vast majority have held steady… they haven’t benefited from trickle down economics (of course, they were never supposed to) and so their spending is constrained.
Let’s make one thing abundantly clear, the consumer drives the economy in the US. Period. Without more disposable income available to those at the bottom, you can forget about returning to the exceptional economic growth rates we saw in the post-WW2 US until the Seventies.
So, if you want to make it about taxes, then rates at the top will have to go up a lot and rates for everyone making less than $60,000 would need to go to zero. If you want an economic boom and the only tool you’re willing to use is tax policy, then that’s your solution. Of course Bill would never understand that, even if he didn’t have a vested interest in not understanding it.
But, to give some credit where it’s due, O’Reilly didn’t waste time railing against ‘economic uncertainty’ or talking about how we’re all doomed by the federal government’s debt levels, two of the primary talking points used by the right to explain (though they sound like morons) the weak recovery. For that, I have to say I’m thankful. At least some on the right are making progress and getting closer to economic reality.