Now, some say we don't need to worry about this public investment deficit because private investments fill the gap. Baloney.
Corporations are focused on getting the best return for themselves, not for America. For most of the last four decades, they've made money by lowering their costs, at the expense of working people: capping wages, reducing taxes, and deregulating.
A common assumption is that when American corporations are profitable, Americans are better off. But that's false. Trickle-down economics is a sham. Tax cuts and subsidies to big corporations and the wealthy don't build the economy. Economies don't grow from the top down they grow from the bottom up, through public investment.
So if private investment won't fill the gap, how do we fill it? Two ways: tax the wealthy and large corporations, and borrow.
Tax rates on the wealthy and on corporations have continued to drop over the past 40 years, just as the deficit in public investment has grown. In the 1950s, the highest tax rate on individuals was over 90 percent. Even after tax deductions and credits, it was still over 40 percent. But since then, tax rates have dropped dramatically. For the first time on record, the 400 richest Americans now pay a lower effective tax rate than people in the bottom half. Revenue from corporate taxes has also plummeted.
If wealthy individuals and corporations want all the advantages that come with being American, they have to pay taxes so America can afford the public investments necessary for a high-wage, high-productivity society.
The other way to pay for public investment is through public borrowing. This kind of borrowing doesn't burden future generations, because it's used to build a better future for those future generations.
Remember: There's a difference between borrowing for the future and borrowing for today. You might not want to borrow to pay for a vacation, but it's perfectly rational to borrow to purchase a house, because a vacation doesn't have any future return, while a home does. Right now, the federal budget irrationally treats all government borrowing the same.
The government needs a public investment budget separate from the current spending budget to clarify what we're investing in and allow us to keep borrowing for investments as long as the returns justify it.
Public investment is the biggest and most important deficit you've never heard of.
Don't listen to people who claim we can't afford to invest in the American people. We can afford it. We can't afford not to. Joe Biden needs to recognize this, and make public investment a central part of his economic strategy.
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