Obama signing the bill extending the Bush administration's tax cuts for the wealthiest Americans, will result in one thing only: US income inequality will exceed the records set in the months preceding the crash of 1929 and the financial crisis of 2007. Obama has championed socialism for the rich and that might well produce another financial crisis.
Look at the correlation. A study from Emmanuel Saez shows that in 2007, just before the global financial crisis, income for the richest Americans grew at its second fastest rate on record since 1913 almost equalling the 1928 record just before the Great Depression.
Australian economist Steve Keen argues that when the banks get too big and rich, it hurts the economy and leads to a Ponzi scheme because it places too much wealth in the hands of a few. And let's remember that the US government has created this with the Treasury Department encouraging banks to use the bailout money to buy their competitors, and pushing through an amendment to US tax laws that actually rewards mergers in the banking industry.
And economist Robert Reich points out the inequality in the lead up to the Great Depression and Great Recession left the economy in a mess. "Had the share going to the middle class not fallen, middle-class consumers would not have needed to go as deeply into debt in order to sustain their middle-class lifestyle,'' Reich says. "Had the rich received a smaller share, they would not have bid up the prices of speculative assets so high."
The pattern with the Great Depression and Great Recession is the same. Rising inequality led to financial disaster. I would add one more problem: the richer you make a certain group, the more likely it will be that they will buy off politicians.
How is it that a democratic system allows economic policies to flourish favoring a few thousand individuals at the economic pinnacle at the expense of the majority? Obama's tax deal will make it worse.
no comment untill now