It's hard to believe that we're having a national debate about giving more to those who have the most -- yet that’s the conversation in Washington, D.C. Should we give the very wealthy tax cuts that amount to nearly twice the typical family’s annual income? Or should we put those tax revenues to work to create more jobs for the poor, the middle class, and the unemployed, to promote the common good?
We've been down this road before. In the early 2000s, we gave massive tax cuts to the wealthy. It did not lead to strong growth in investment, employment, or wages, but it did lead to higher income inequality and more McMansions. We need to turn our economy around. Continuing tax boondoggles for those who don’t need the extra money is not the right policy.
The poor and the middle-class have borne the brunt of the Great Recession, which has wreaked havoc on families. Unemployment continues to be at near-record highs. One in 10 workers is out of work and searching for a job. For every five job-hunters, there is only one job available -- like a grim game of musical chairs. The typical U.S. household makes almost $2,200 less a year than it did when the recession began, the largest two-year decline since the Census started tracking incomes over four decades ago.
Things have been even worse for those at the very bottom. The share of the U.S. population living in poverty rose for the third straight year and is now higher than at any point in the last 15 years. In 2009, one out of every five children lived in poverty.
In contrast, the richest 5 percent of U.S. households (after an income setback from 2007 to 2008) saw their average income actually rise last year by $1,800.
After those massive Bush tax cuts expire at the end of December, President Obama wants to cut taxes for everyone making less than $250,000 -- that's 98 percent of the people in our country. Conservatives refuse to go along with this plan unless they can also cut taxes for the richest 2 percent of Americans.
Conservatives claim cutting taxes for the wealthy would help small businesses create jobs, but that’s not what their plan does. Only 3 percent of all taxpayers with any business income are among those with incomes above $250,000. And of that 3 percent, most are not what we'd generally think of as small business owners; rather, they are partners in big law firms, hedge fund managers, and even the owners of some of the biggest companies in the world.
Keeping those high-end tax cuts in place over the next 10 years and paying interest on the added debt would cost the federal government more than $800 billion -- more than we spent on the Wall Street bailout. More than 80 percent of the benefit will go to people making at least $1 million a year; their average tax cut would be more than $100,000.
We can make a significant difference in the lives of millions of Americans if we put that $800 billion to good use paving the way for economic growth. We can build bridges and schools. We can make sure the unemployed have access to support while they search for work. We can put people to work.
Let's change the conversation. Let's ask our leaders to begin discussing how to create new jobs and lift the wages of the poor and middle class by investing in our country -- the best ways to deliver widely shared prosperity and restore the American dream.
Heather Boushey is a senior economist and Michael Linden is the associate director for tax and budget policy at the Center for American Progress.