Letter to the Editor

Economic lessons

Arroyo GrandeOctober 5, 2012 

The nation’s current economic problems originated in 1981, when the tax codes became more regressive in what was called “supply-side economics.” The median household income then was equivalent to $45,000 in today’s purchasing power. Since then, the growth rate has been about 2.65 percent per year. In running those numbers: $45,000 compounded at 2.65 percent for 31 years is more than $100,000. In other words, if all Americans had been gaining at a rate equal to the growth rate during the supply-side era, the median income would now be more than $100,000 per year.

To see why the median is now less than half of that, one would need to look no farther than the recently published Forbes 400 list. Those fortunate 400 individuals hold more wealth than the more than 150,000,000 people living below the median. To keep the economy going, many people incurred enormous personal debt financing a housing boom. The economy is now stagnated because those people are repaying the loans that kept the economy going for those years. Had those same people benefited from the nation’s economic growth, this would not have happened.

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