FV The Biggest Deficit You Have Never Heard Of

The public return on investments in basic research and development are huge. America’s competitiveness depends on them because no individual company has an incentive to make them. The lithium-ion battery that powers iPhones and electric cars was developed by federally sponsored materials science research, while the Internet itself was borne out of the Advanced Research Projects Administration. 

And yet in recent years, public investment in basic research has declined as well. 

Are you seeing a pattern yet? Federal investments in all these areas have shrunk — even though the payoffs from these investments are gigantic, and the costs of not making them are astronomical. American productivity is already suffering.

Now, some say we don’t need to worry about this public investment deficit because private investments fill the gap. Baloney.

Corporations are focused on getting the best return for themselves, not for America. For most of the last four decades, they’ve made money by lowering their costs, at the expense of working people: capping wages, reducing taxes, and deregulating.

A common assumption is that when American corporations are profitable, Americans are better off. But that’s false. Trickle-down economics is a sham. Tax cuts and subsidies to big corporations and the wealthy don’t build the economy. Economies don’t grow from the top down — they grow from the bottom up, through public investment.

So if private investment won’t fill the gap, how do we fill it? Two ways: tax the wealthy and large corporations, and borrow.

Tax rates on the wealthy and on corporations have continued to drop over the past 40 years, just as the deficit in public investment has grown. In the 1950s, the highest tax rate on individuals was over 90 percent. Even after tax deductions and credits, it was still over 40 percent. But since then, tax rates have dropped dramatically. For the first time on record, the 400 richest Americans now pay a lower effective tax rate than people in the bottom half.
Revenue from corporate taxes has also plummeted.

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