The “NEW NORMAL”

Politicians coined the term “New Deal” in the late 1930’s to claim credit for economic growth after the Great Depression.

Economists now tell us a “New Normal” is a “New Reality”.   Most Americans may have to live with  Hard Times for a long time!

Wage inequality was a major cause of our Great Recession.  What has changed?

More and more income generated by our economy is still going to people at the top of the heap.  Typical CEO’s earn up to 350 times salaries and benefits of typical workers.  And really wealthy people spend very small portions of their incomes on consumable goods.

Our economy needs the majority (basically our middle class) spending 70% of their earnings on consumable goods to grow.  If just current top tax rates (35%) expired on December 31, ceilings would return to 39.6%.  If middle-class workers received tax cuts, markets of goods and services could increase to sustainable growth levels, and eliminate forced low-interest rates. The balance of supplies and demands would be restored sooner.

This week a bipartisan committee created to recommend ways to cut the federal deficit included cuts to Mortgage Interest Deductions (MID) that homeowners with mortgages use to offset their federal income taxes, and place caps on amounts homeowners can use. Recommendations also call for cancellations of MID on second homes and equity loans.  Other sections increase gas taxes 15¢ per gallon, cut social security and farm programs, cut military pensions, and give more tax breaks to corporations. 

Today the U.S. Senate blocked tax cuts for single people making less than $200,000 per year, and couples making less than $250,000.  How wrong-headed can these people be?

The above graphic portrays generally accepted recurring economic cycles.  This wave is repeated countless times, but reference points differ constantly.  It tells us where we’re going, but not how or when we’ll get there. That always depends a lot on our drivers and the speed we’re going.

When will they understand they’re driving horse-drawn wagons?  Wouldn’t make more sense to feed the horses before feeding the fat cats driving and riding in the wagons?  Maybe the fat cats should jump out and help us (middle-class) horses pull the wagons when the going gets tough?

Maybe “horse sense” doesn’t cut it in their “New Normal” world, but maybe it should! 

Acknowledgements to Alan V. Deardorff, Wikipedia, Associated Press, Harvard Business Review, Thomson Reuters, Bloomberg, Florida Realtors, and others for information appearing in this blog.