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Comment by mattobrien | Hacker News Reader

Supply side economics does not really increase supply. That's just the moniker. Supply side economics means tax cuts for the well to do, who will supposedly then create the jobs that will grow the economy. But this rests on the middle class stagnating - something that has in fact happened in the last 30 years. The top 1% control 22% of wealth (as of 2006), compared to 8% in 1980. For comparison's sake, the last time this percentage was this high was 1928. If you don't think there's a high correlation between income inequality and levels of debt, then you are fooling yourself.

There's a point at which the middle class being too poor puts the entire economy at risk. We are there now. Being an acolyte of supply side economics today is like being a communist in 1989 - you can keep believing in the true faith, but it's been refuted in the real world.

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what are you talking about? income inequality doesn't mean anything if everyone's standard of living is increasing. Would you prefer YOUR standard of living to go DOWN just so you can have the satisfaction of watching the rich get poorer? I would much rather have everyone get richer even if that means the rich get richer. You're comparing percentages but you're neglecting that on a per capita basis the 78% of 2006 is much much larger than the 92% of 1980. It's not even close.

whose debt are you talking about? household debt or government debt? if the former it is up to people not to live beyond their means, if the latter the government is simply stealing from us. Where we are at now has nothing to do with the middle class and everything to do with government intervention in 1995 and again 2000 and 2001.

what the hell has modern macroeconomics done to our country? all over the place I see specious analysis such as this comparing numbers that either don't mean anything, are inaccurately measured, or can't be shown to be an indicator of other things.

edit: I pulled up some numbers

GDP in 1980: $2.7 trillion

GDP in 2006: $13.2 trillion

Population in 1980: 226.5 Million

Population 2006: 298.4 million

GDP per capita 1980: $11,920

GDP per capita 2006: $44,000

$11,920 in 2006 dollars according to the CPI: $28,824

we're not quite twice as wealthy, but we're far FAR richer now than in 1980. Income inequality means nothing.

You are wrong. Everyone's standard of living is not increasing. Quite the opposite. Adjusted for inflation, median incomes have stagnated or declined in the last 30 years. Household debt has skyrocketed oftentimes as people have simply tried to keep up. Yes, some people have lived ostentatiously beyond their means, but many others are just trying to stay afloat, and deal with the rising costs of everything as their paychecks stay the same. Conservatives told people that incomes did not matter because their investments (stocks and houses) were rising in value. This fallacy has been utterly exposed.

The gains in GDP have more or less gone entirely to the top 10%, and in particular, the top 1% of the population. This makes everyone else feel like the pie isn't growing - because it isn't for them. Now that their stocks and homes are worth substantially less, and their credit is drying up, people have to spend less. And this fall in aggregate demand has disastrous consequences - not just here, but abroad as well, for all the countries that depended on exporting things to US consumers (Germany, Japan, and China).

Income inequality is of course not in itself a bad thing; it is the consequence of an economy where risk and work are rewarded. The question is extreme income inequality. Obviously this is a subjective matter. You may not think we have extreme inequality now, but when it's at the highest level it's been in 80 years, I'd venture that it is extreme. And extreme inequality often leads to falling aggregate demand and debt deflation. In short, a depression. If you think income inequality means nothing, you know nothing.

your own numbers refute that. look at your original percentages. do basic math.

the amount the wealthy control has almost tripled, but the amount of overall wealth has almost quintupled.

imagine that the nation's wealth is represented by a dollar and I control 8% of it. Over time the wealth of the nation doubles but my percentage control has grown to 22%.

before I got 8 cents and the rest of the nation got 92 cents to share.

now we have 2 dollars that I get 22% of...44 cents.

the rest of the nation now has $1.56 to share. Discounting the fact that i'll probably reinvest part of my 44 cents, the nation is still much wealthier than before.

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