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Here’s a truth: when people cannot identify the source of their troubles they are much more likely to accept a bad situation as a kind of natural disaster with no fault and no solution. – Jeff Klein
Klein’s remark  resonates with me, because the economic reports in the press, or on TV news or the internet, often elicit that kind of reaction. News of continuing high levels of unemployment, or declining housing or stock markets are typically presented in the same way as reports on a natural disaster like Hurricane/Tropical Storm Irene. It’s bad news, but it’s presented as equally inscrutable, somehow beyond human control. Explanations of cause and effect nearly always come off as mushy or speculative, in the end seemingly unknowable.
This, of course, operates in favor of those who would obfuscate economic reality for political reasons, which makes our efforts to sort everything out that much more important. In fact, we need to identify exactly what’s wrong, as best we can, so we can sensibly fashion proper remedies. Bruce Levine puts it this way:
In the words of Leonard Cohen, “Everybody knows that the deal is rotten.” Well, maybe not everybody, but damn near everybody. But what doesn’t everybody know? 
My aim here is to improve our understanding of the implications of inequality, as well as the mechanics of associated economic factors (such as taxation, debt, banking, employment, and consumer demand). I’m striving for a better conceptual understanding of what has happened to America over several decades, how the economic meltdown came to pass, where we are today, and what it means for our future.
The day I began working on this post (9/4/11), Robert Reich posted an excellent article that hits the nail right on the head (Why Inequality Is the Real Cause of Our Ongoing Terrible Economy).  Indeed, the title of his article alludes to the overriding central fact around which, in my opinion (and also apparently his), all of the circumstances and factors of our current economic difficulties revolve: the ever-increasing inequality in incomes and wealth between the richest Americans and everybody else.
One early commenter to Reich’s post asked this: “Yeah, but what’s the cause of the inequality?” That’s a good question: If the continuing steep rise of inequality over 30 years is to be reversed or even halted, its cause(s) will have to be identified and reversed. We discussed that question on this site on our Summary page several months ago, and will return to it in this series of posts, providing a more detailed answer.
A Forbidden Topic
Indeed, understanding all of the implications of inequality is critically important. As the wealthy elite continue to enrich themselves at everyone else’s expense in America, many of them do not want us to know about it or think about it. Obfuscation of this issue hangs like a dark cloud over politics, and it is avoided like the plague by the mainstream media; it was with the help of inadequate, low taxes over three decades that the wealthiest Americans greatly increased their percentage of wealth (and incomes), and through control of the media and government the wealthy class aims to keep it that way.
Thus, tax increases for the wealthy are off the table politically. Government officials and politicians are asked to sign a pledge never to increase taxes, at the behest of Grover Norquist and the Americans for Tax Reform, and many have. End of discussion.
For public consumption, increasing taxes on very large incomes and corporate profits has been conflated with tax increases for everyone else. When that fails to turn people against taxing the rich, as when President Obama was interviewed earlier this year by Bill O’Reilly, higher taxes for the rich is pointedly attacked as an improper wealth transfer.  But O’Reilly’s argument ignores a hidden fact: The growth of inequality over the last three decades, with its impoverishment of the middle class, is itself the mother of all wealth transfers.
We have been asked to accept unquestioningly the current state of inequality of wealth and incomes as fait accompli, fair and unassailable. Thus, the debates on budgets and jobs ensue today as if this impoverishment never happened, as if the issues were the same as they were in the 1960s. But it is not fair, and it is dangerously destructive. We need to understand what causes growth in inequality and stop it, for continuing along this path spells disaster for the United States.
That crucial point is obscured by politics, with its focus on deficit reduction rather than job creation and economic recovery (as if the two were somehow unrelated), and its call for smaller government, just when government action is needed the most. President Obama is now constrained to propose a jobs program (9/8/11) that includes no new tax revenues, even though taxing corporations and the wealthy could easily make sufficient stimulus funds available.
Living with Supply-side Constraints
Not recognizing additional revenues as at least a potential (if not an essential) element of the solution paints America into a non-existent corner: Without direct government investment in jobs, we must rely on the hope that jobs will be created in response to expanded payroll tax cuts and tax benefits for small businesses, and similar elements of the Obama jobs plan. This is similar to the incentive of low interest rates provided by monetary policy, but at a cost of reduced government revenues. Relying on these “supply side” approaches is economically risky, however, for they do nothing to enhance demand and thereby create reasons for businesses to respond by creating new jobs.  In contrast, demand-side stimulus – government spending – directly increases incomes and jobs and enhances demand.
With consumer demand in a downward spiral, we can expect to see continuing job losses until the economy gets a boost in incomes and GDP. Thus, much more could be accomplished through direct investment in jobs, paid for with tax revenues collected from the rich and corporations; this would increase economic activity through spending, while avoiding greater pressure on budget deficits.
Such an expansive fiscal policy has been off the table politically all year, however, and now the “fact” of the recessive budget settlement (required by the Tea Party/GOP for its agreement to raise the debt ceiling), will likely be accepted as a fait accompli. Today, the day after Obama’s speech (9/9/11), the only sign I see even acknowledging the existence of a realistic tax increase option is an appeal from Karen Scharff of Citizens Action of New York supporting an “Emergency Jobs to Restore the American Dream Act,” a bill intended to create directly more than 2 million jobs over the next two years:
President Obama just finished his speech in front of a joint session of Congress detailing the American Jobs Act – his plan to begin the process of turning our economy around.
There are a lot of good things in his proposal: investment in infrastructure, rebuilding schools, hiring recently laid-off workers, and extending unemployment benefits. The Republican Congress should quickly pass these provisions.
But the jobs crisis in America isn’t going to be fixed by small investments and more tax breaks. Those proposals can have stimulative effects, but if our economy is ever going to recover, then we need to start directly creating jobs – not simply waiting around for small stimulus plans to take their course.
Rep. Jan Schakowsky of Illinois will soon be introducing the Emergency Jobs to Restore the American Dream Act. It’s a strong bill that would directly create more than 2 million jobs over the next two years through federal investment.
The Emergency Jobs Act would provide jobs to unemployed Americans, and particularly to those who have exhausted unemployment benefits, by hiring workers in education, health care, and infrastructure, police and firefighters, a student jobs program, and improving parks. It’ll help us rebuild our economy while strengthening our communities.
This is the kind of legislation that America needs now, urgently. We can’t sit around and wait any longer for our problems to work themselves out. We need our elected officials to take a stand and take a proactive approach to this economic crisis. * * *
The Emergency Jobs Act will create more than 2 million jobs. And, it will be fully paid for simply by creating higher tax brackets for millionaires and billionaires, eliminating subsidies for oil companies and ending tax loopholes for corporations that ship American jobs overseas.
We can dream big. We don’t have to settle. If we want jobs created, then let’s create them. 
These higher tax brackets are exactly what signers of the Norquist pledge agree not to pass. However, that such a bill as this has practically no chance of being passed today should not lead us to conclude, or even suspect, that it is not a good idea. Indeed, many wealthy business leaders are calling for this kind of economic recovery, and they want it now.
Time Running Out
For example, billionaire Howard Schultz, a registered Democrat and CEO of Starbucks, is campaigning among business leaders to put pressure on politicians to get serious about job creation.  In an open letter to his customers and friends, he said this:
Like so many of you, I am deeply disappointed by the pervasive failure of leadership in Washington. And also like you, I am frustrated by our political leaders’ steadfast refusal to recognize that, for every day they perpetuate partisan conflict and put ideology over country, America and Americans suffer from the combined effects of paralysis and uncertainty. Americans can’t find jobs. Small businesses can’t get credit. And the fracturing of consumer confidence continues.
We are better than this.
He asked fellow business leaders to join him in signing a two-part pledge:
First, to withhold political campaign contributions until a transparent, comprehensive, bipartisan debt-and-deficit package is reached that honestly, and fairly, sets America on a path to long-term financial health and security. Second, to do all we can to break the cycle of economic uncertainty that grips our country by committing to accelerate investment in jobs and hiring. 
A strong, patriotic response to this excellent and clever call to arms may do much to boost the prospects for Obama’s new jobs initiative, but probably won’t help enough, if the economy continues to decline. We cannot expect sensible business leaders, including Howard Schultz, to continue throwing good money after bad. Jobs will come in response to demand – that is the economic reality. 
There is also a growing public push among billionaires and millionaires to pay higher taxes. A leader in that effort is one of America’s two wealthiest people, Warren Buffet. Buffet staunchly maintains that the rich do not pay a fair share of taxes:
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. 
Significantly, Buffet also rejects Reaganomic, “trickle-down” economics:
I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. 
Nor, he says, do tax breaks for the wealthy and corporations create jobs: “You know what’s happened since : lower tax rates and far lower job creation.” 
So much for the “don’t tax the job creators” mantra. In Buffet’s view, federal taxes are going to have to be increased:
Now the question is, do we get more money from the person who’s going to serve me lunch today, or do we get it from me? I think we should get it from me. 
Warren Buffet is not alone. Recently, other millionaires have also requested tax increases, arguing among other things that their wealth is “the result of a robust economy,” and that “we shouldn’t be wallowing in our riches while everyone else is suffering.” 
This is certainly patriotic and public-spirited, and for many of them it also candidly reflects appreciation of where their wealth came from. A vibrant American economy is in their self-interest, and companies like Starbucks rely heavily on American consumers and can be badly hurt in a recessed economy. The U.S. on its present course faces the prospect of years of middle class stagnation or worse, and many (if not most) of America’s wealthiest people will be badly hurt if the economy collapses.
Although some globalized American corporations may have freed themselves of the constraints of American consumer demand, for many or most of them we are still “all in it together.” It is significant that now is the time so many business leaders have stepped forward in defense of the American economy against policies ostensibly favoring them.
The handwriting is on the wall. They should know, better than most, the damage already wrought by rising inequality, and where we will end up on our current course.
JMH – 9/9/11
 High-Stakes Blackmail: “Malefactors of Great Wealth”, by Jeff Klein, CounterPunch Op-Ed, August 21, 2011.
 “Three Things That Must Happen for Us to Rise Up and Defeat the Corporatocracy”, by Bruce E. Levine, Alternet, Op-Ed, August 26, 2011. (Emphasis added)
 Why Inequality Is the Real Cause of Our Ongoing Terrible Economy, by Robert Reich, Nation of Change, Economy, September 4, 2011. Professor Reich is also keeping us up to date on recent changes in the economy. See his second post of today, The Zero Economy, by Robert Reich, Truth0ut, September 4, 2011.
 See O’Reilly’s Obama Interview, where O’Reilly pointedly asked the President: “Do you deny [The Wall Street Journal’s] assessment? Do you deny that you’re a man who wants to redistribute income?” Obama replied: “Absolutely.”
 It has not taken long for employers to deny that such “supply-side” incentives will significantly affect their hiring decisions: Employers Say Jobs Plan Won’t Lead to Hiring Spur, by Motoko Rich, The New York Times, September 9, 2011.
 See Citizen Action Alert 9/9/11
 Howard Schultz ABC interview.
 Starbucks letter. (Emphasis added.) A similar full-page ad was printed in the New York Times last week.
 Employers Say Jobs Plan Won’t Lead to Hiring Spur, by Motoko Rich, The New York Times, September 9, 2011.
 Stop Coddling the Super Rich, by Warren E. Buffett, The New York Times, Op-ed, August 14, 2011.
 CNN Money interview. (Emphasis added.)
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