In a fitting Labor Day headline, the International Labour Organization (ILO) reported today that workers in the United States are the most productive in the world yet again, creating $63,885 of wealth each last year. Education, access to technology, and longer working hours per person than most other industrialized countries propelled the U.S. to the top in 2006.
Are our workers receiving adequate compensation for their hard work? Americans have less vacation time, more expensive medical care, far less paid maternity leave, and less union representation than workers in nearly any other industrialized nation. While America’s economy is hailed as the most successful in the world, an overwhelming amount of wealth rests in the hands of the very rich: 33% of all wealth belongs to the wealthiest 1% of Americans, and 71% of all wealth belongs to the wealthiest 10%.
It is American workers who are willing to work long hours at an intense pace who make it possible for a handful of Americans to enjoy a lifestyle unimaginable in most of the world. For all of the complaints levied against American tax rates, our average personal income tax rates are the 8th lowest in the industrialized world, according to the Organisation for Economic Co-operation and Development (OECD). In arguments about tax rates, many proponents of lower taxes argue that tax cuts help the economy by spurring investment.
Investment occurs when money is spent. When investment occurs, the economy is grown with new businesses, new products, and new jobs. Are lower income tax rates for people with vast personal fortunes really the best way to spend money? After all, if a billionaire receives a 20% tax cut, is she more likely to invest it in an up-start business, or to put it in the bank to collect interest? Common sense and fiscal responsibility do not justify taking risks with tax rebates, which could be going right back to the government come next year. If taxes are cut, a person with a great amount of wealth is likely to keep the money in a low-risk bank account or mutual fund, waiting for a rainy day to come along. The ultra-wealthy are more likely to be savers than spenders, given generous tax cuts.
The government, however, is an ambitious institution. Given hundreds of millions of dollars in new tax revenue, members of either party will find ways to spend it. For Republicans, this might mean a military hardware overhaul, tens of thousands of new police officers, or paying down the national debt. For Democrats, this might mean universal health care, new student loan programs, or an environmental clean-up fund. In either case, tax money received by the government is likely to be spent, and fast.
History shows us that when the government spends big, the economy grows. In the 1940’s and 1950’s, the government spent record amounts of money in the defense industry. As a result, the military-industrial complex gave rise to American manufacturing, providing jobs that paid people enough to buy new goods like televisions and automobiles. Over the past decade, we have spent a record amount of money on homeland security and intelligence. In the next few years, our economy will skyrocket, as long as the money spent is properly spread throughout the population.
Rather than harming the economy and stifling growth, a progressive taxation system ensures that money is rapidly spent. Tax cuts often lead to economic stagnation, as money sits in private bank accounts earning minimal interest. Restructuring our tax system to make it more progressive, freeing up funds in private bank accounts to be spent on everything from energy to defense to transportation, is the real way to stimulate the economy.
American workers are contributing more to the global economy than anyone else. Our laborers should be enjoying a luxurious day off today. If we want to continue to honor their hard work and contributions all year, we need to make sure that $63,885 per American worker is being spent on improving lives and creating jobs, not just collecting pennies in executive accounts.