Tuesday, September 16, 2014


(h/t Mark Thoma)

This is just more evidence for Keyne's notion of aggregate demand and it's relation to the general economy.  The moral here is that inequality hurts the overall economy because the top 1% just doesn't spend enough.
Income Inequality Pressures State Tax Revenue, S&P Says
By Damian Paletta
3:46 pm ET
Sep 15, 2014

What is the real impact of separating wages for the wealthiest Americans and everyone else?

Standard and Poor’s Ratings Services offered a new answer Monday, arguing that a rising share of income to the wealthiest Americans has resulted in less tax revenue than would otherwise be the case, making it harder for states to fund all of their services.

S&P found that wealthier Americans, who have seen the most income gains in recent years, also have higher savings rates than many other Americans, meaning they are likely to hold onto a larger share of their money and not spend it. That means a smaller portion of this money ends up as sales taxes collected by states.

“And since one person’s spending is another person’s income, the result is slower overall personal income growth despite continued strong income gains at the top,” S&P said.

1 comment:

Ken Hoop said...

Russia might be taking steps to restore healthy socialism.



“The economic war with the West,” Akopov says, “is forcing the authorities to recognize the need for an acceleration of the process of consolidating strategic branches into the hands of the state and inevitably raises issues not only about the role of the oligarchate in Russian life but also of the relationship of state capitalism and large private property, about the social state and cooperative property, about the free hand of the market, and yes, about capitalism as such.”