Tax Cuts for the Rich as the American Dream Fades Away?

 

“We’re going to bring back a thing called the American dream.” 

Donald J. Trump

If you are in the American working or middle class, as costs of every conceivable basic – from food to transportation to housing to childcare – have reached unsustainable levels, you may be feeling what most of us feel: the American dream no longer exists, rising generations will live with more problems and lower quality of life standards than their parents, stability and hope are seen heading for the exits… unless that silver spoon is in your mouth or you simply luck out. European cities, on a crowded continent that has roiled in wars and revolutions for centuries, have relegated most of their residents to “renters.” The United States seems headed in that direction.

Even as candidates pledge to level the cost of living, there are elements over which even the President of the United States cannot find simple solutions. So much of this nation’s policies are predicated on the definitively false premise of giving the rich tax policies that return more money into their pockets will trickle down to the rest of us; more good jobs will be created, and the reduced tax base will made up for by means of taxes on those with those better jobs. This “incent the job creators” mythology has NEVER EVER WORKED. Rich folks didn’t get that way by hiring lots of people at good pay when they get a tax windfall. Yet half the country still believes this consistently disproven premise.

Presidents also do not have control over global shortages, supply chain challenges that emanate far from our shores or even interest rates that are uniquely controlled by a very independent Federal Reserve. Instability from climate change and wars in other nations contribute to this mess. Tariffs might seem like a good idea, until you realize that the primary victims are US consumers of the relevant goods, who pay the higher prices. And since the purchase of necessary consumer goods takes up a vastly larger share of working- or middle-class budget than a budget from a millionaire’s allocated cost of living, tariffs are a very cruel regressive tax on everyone but the rich.

Another huge price factor is that if companies can pass higher costs to consumers, hard dollar profits that calculated as percentage of the total purchase price soar when costs soar. The percentage may remain the same, but hard dollar profits rise upwards. Companies can play games like shirking the size of the package by charging the same price, but you can see that conservatives, running capital markets and those huge companies, are apparently devoid of empathy and incapable of self-regulation. So today, I would like to visit this urban transition from owning to renting primary residences to the rather clear price gouging for basic necessities, like food. Should we simply alter the definition of the American dream and pretend it still exists? If you look at MAGA policies, you know Trump’s pledge above is an empty promise.

Writing for the September 7th New York Times, Anna Kodé explains: “The American dream symbolizes many abstract ideals: hard work, assimilation, equal opportunity. But for generations it has meant one particular path in life: Get a job, save up for a down payment, and achieve the fairy-tale ending of domestic bliss and monthly mortgage payments.

“Now, though, with soaring housing costs — along with student loan debt and inflation — homeownership is becoming increasingly inaccessible for young Americans. As of June, according to Redfin, nearly one in 10 homes in the country were worth $1 million or more — a share that more than doubled since June 2019. And as prices rise, people are becoming first-time homeowners later in life. In a 2023 report from the National Association of Realtors, the median age for a first-time home buyer was 35. In 1981, it was 29… Even before the current housing crisis, people have been arguing that the American dream was disappearing, deteriorating, dying or dead. But perhaps it is simply changing.

“Over the past month, I’ve been speaking with millennials and zoomers across the country to learn how they think about the American dream. My survey was nonscientific, but it dovetailed with recent polling: Many of the people I spoke with expressed how today’s exorbitantly high prices have made homeownership feel unattainable, and that in such an uncertain world — plagued by pandemics, political turmoil, war, climate change and other disasters — it felt foolish to pinch pennies for the goal of one day buying property. Instead, many young people are placing more value on community and family, growing their wealth in other ways, or spending more on everyday pleasures.

“When the concept of the American dream first emerged, it was meant to be an ideal for people to mold into whatever fit their lives. Over time, it became a more rigid model, cementing homeownership at its core. Now, young Americans have been forced into a turning point for the American dream, one that might not have a house in it at all.” With student debt factored into the equation, with inflation corrected tuition running at a 3+ multiple over what their parents paid, even the notion of younger Americans’ investing in asset-building is a stretch.

How about that price-gouging that Kamala Harris is talking about? MAGA claims it is due to bad policymaking, not greed. But what is the truth? Writing for the September 9th NPR, Alina Selyukh notes: “From February 2020 to this July, grocery prices grew a cumulative 25.6%. That's higher than overall inflation, which was 21.6% during that same period… It doesn't help that corporate executives have spent recent years touting their pricing power on calls with investors, like when the CEO of Cottonelle-maker Kimberly-Clark, Mike Hsu, said last year: ‘If the price goes up on bath tissue, generally doesn't mean you're going to use the bathroom less.’ Many makers and sellers of home and pantry staples have reported record profits…

“NPR crunched financial disclosures by a dozen of the largest grocery-item makers and sellers, including Walmart, Pepsi, Oreo-maker Mondelez and Procter & Gamble, which makes Pampers and Bounty… The idea was to track changes not in the sheer dollar amount, which rides the waves of our shopping sprees, but in the percentage of money that stays in corporate coffers after a sale. Economists and accountants use different metrics for this. The gross profit margin is one of them — the portion that companies keep after paying just the direct costs to make or stock their goods… Companies' financial disclosures cover global operations, meaning lots of variety in costs and prices. But for almost all companies that NPR analyzed, between 2018 and 2023 the [percentage-based] margins either declined or grew less than 1%...

“‘If supply is fixed and the buyers suddenly have more money, then prices are going to rise — and that's kind of what happened,’ said Ian Shepherdson, chief economist at Pantheon Macroeconomics. ‘There genuinely was an increase in costs, but then there was this extra margin on top. So the question is, how on earth did [retailers] manage to get away with that? That to me is the big issue.’… Only this year did brands including Pepsi and Nestlé begin noting pushback from shoppers. Walmart and Target have started promoting discounts and lower prices. The cost of ingredients and shipping has eased; wage growth has cooled. And so, many grocery prices have been declining, including those for cereal, cheese and fruit.”

You only have to remember that when costs go up, profits based on a percentage of costs go up too – even if that percentage stays the same. Wink. Wink. Corporate America hates it when consumers push back… but if they can so easily respond to those pushbacks, perhaps they were price gouging in the first place.

I’m Peter Dekom, and be wary of politicians’ pledging to slash the cost of living while pursuing policies that produce the opposite effect.