Ashley Sherard

ECO 105
Final Take Home Essay
Currently, our society faces an abundance of serious economic and social
problems. These problems include a weak economy which continues to result in serious levels of
unemployment and underemployment, extreme and growing inequalities in both wealth and
income, a looming long term debt crisis which will primarily be driven by raising health care
costs for our again population and our unusually large percentage of poor people, and global
climate change. The perspectives I believe that best provide the most powerful approach to these
issues that our society now faces are the liberal and radical schools of thought. It is evident in the
previous thirty years that without much government intervention, our economy has resulted in
corporations turning our economy and society into a catastrophe.
With recent privatization and deregulating, we see large corporations abusing power and
the working class continuing to suffer. Throughout the previous decades, we have seen the rich
grown richer, while the poor have grown poorer. The inequalities between the two are very
prominent in society today. People in the lower class frequently lose their jobs and receive pay
cuts, while the rich continue to prosper and their salaries continue to soar. In addition, health
insurance costs are on a constant rise. Also, with deregulation, global climate change has become
a huge issue that we need to seriously conquer to prevent the destruction of the earth.
Corporations with a profit maximization mindset abuse and disregard the natural resources of the
earth, which will ultimately result in long-term consequences for future generations.

I believe that President Reagan was not correct when he argued that our economy had too
much government regulation and that taxes on corporations and the wealthy were too high. This
indeed started the movement towards inequality between the classes of society. The period of
Regan tax reforms during the 1980s severely worsened the tax situation for the working and
lower class. During this period, federal income taxes were lowered, mainly for the wealthy, and
payroll taxes on workers increased substantially.
The average federal tax rate on earnings (including both income and payroll taxes) went
from 11.5 percent to 14.6 percent for the poorest 10 percent of the population. For the
poorest 50 percent of the population the tax rate did not change. For the richest 10
percent of the population the rate decreased from 44.3 percent to 32.6 percent; for the
richest 5 percent the rate fell from 46.6 percent to 31.6 percent; and for the richest 1
percent the rate fell from 50.1 percent to 28.8 percent (Hunt, 209-210).
Furthermore, income taxes on corporations have for the most part been on the decline since the
1950s. The incomes of some of the biggest corporations are gargantuan and even with a
mandated tax rate; they continue to get tax breaks. In 2004, the total corporate tax cut was $61
billion dollars (Sheehan, 6). The Keynesians were definitely more on target with the idea that a
progressive tax reform would be more suitable. How does it make sense that we are taking the
biggest amount in taxes from the people who need money the most?
We have an official unemployment rate of just below 8 percent and an underemployment
rate of almost 15 percent (Faux, 36). Out of the 46 million people living in America, 15% are
considered poor (Edelman, 1). Also, the share of the poor population below half the poverty line
is on the rise. In 1975 it was at 30%, and in 2010 it reached a high of 44.3% (S.O.W.A, 4). This

is not a result of the poors lack of commitment to acquiring a better standard of living, but low
wage jobs bedeviling millions of people. According to the most recent data available from the
Census Bureau, 104 million people have annual incomes below twice the poverty line. Also,
half the jobs in the nation pay less than $34,000 a year according to the Economic Policy
(Edelman, 1). These low wages are a huge factor in the increase of the income gap faced by
Americans today.
With these devastating statistics, political leaders repetitively make decisions that we all
may never understand. Instead of helping the people in need, they continue to make them suffer.
For example, in the 1970s, Reagan and Bush used the exploding federal deficit as the perfect
excuse to gut social spending on every possible level. They cut unemployment insurance and job
training so that we would have little to fall back on when we lost our jobs. They also gutted
health and safety regulations in the workplace and slashed housing and social services for
millions of poor children (Botwinick, 9). This could be seen as an underlying mean on the lack
of social mobility. The people at the bottom dont have to means necessary to improve their
productivity to acquire a better lifestyle.
The lack of social mobility also plays a part in the extreme income gap. Economist
Thomas Hertz has found that children whose parents are in the bottom fifth of the income
distribution have only a 7.3 percent chance of making it into the top fifth. In contrast, children
born in the top fifth have a 42.3 percent chance of remaining there (Frank, 3). In an economy
where an individual is typically paid based upon their productivity, which requires a task such as
acquiring more education, it is difficult for a child in the lower class to do so, especially with the
increasing prices of a degree. Over a four-year period, SUNY lost nearly $700 million in state
support through budget cuts, and sate funding has remained flat over the past year. Today, nearly

75 percent of the universitys operating budget comes from ever rising tuition and fees (Wittner,
2).
Consequently, even after obtaining a degree, that is not a golden ticket to success. The
2006 Economic Report of the President tells us that the real earnings of college graduates have
actually fell more than 5 percent between 2000 and 2004 (Krugman, 1). Students go to college
with the intent of graduating a receiving a job that can fulfill their needs. But instead they are
faced after graduation with tons of student loans and no way to pay them off due to the lack of
jobs and constant falling wages. College graduates end up taking positions that they are over
qualified for just to make ends meet. Roughly 15 percent of college-educated workers find
themselves in jobs which they are overqualified, the Economic Policy Institute reports, and many
of these jobs pay less than $20 an hour (Uchitelle, 2). The percentage of college graduates
ranging from 20-24 years old who were underemployed went from 34.2% in 2007 to 39.1% in
2010 (S.O.W.A, 11).
Overall, the rich stay rich and the poor stay poor. I believe we have come to a point
where we need to look at other economic systems for ways to improve our own. Its a necessity
that we discover a plan to implement that will increase employment and decrease the dramatic
gap in America. According to Gordons Macroeconomics graph of unemployment, there was a
dramatic spike in unemployment during the 1890s and 1930s. It reached a peak of over 20%
and it stayed above that for at least 5-6 years. This was a period of laissezfaire. Conservatives
argued that the economy would work at its best when government intervention was kept to a
minimum, apparently not.

With an overwhelming deficit, we see budget cuts in areas that are essential needs for our
population. Budget cuts including cuts to Medicare and Medicaid will widen the holes in the
social safety net and further limit investments in education, infrastructure and technology upon
which any chance at future prosperity depends (Faux, 37). We can say the Republicans policies
have without a doubt helped created the current deficit, and despite all the sufferings, they want
to cut Social Security, veterans programs, Medicare, Medicaid, education, nutrition programs,
and virtually every program which benefits low and moderate income Americans (Sanders, 9).
The costs of Medicare and Medicaid are projected to soar and the underlying problem to this is
the soaring costs of health care. Proof of this is evidenced by soaring premiums, co-payments,
and deductibles that all of us are bearing combined with the aging of the boomer generation
(Reich, 17).
In addition to these ordeals, we have witnessed an increase in the global temperature that
has now created countless other problems.
We have five times as much oil and coal and gas on the books as climate scientists think
is safe to burn. We'd have to keep 80 percent of those reserves locked away underground
to avoid that fate. Before we knew those numbers, our fate had been likely. Now, barring
some massive intervention, it seems certain. Yes, this coal and gas and oil is still
technically in the soil. But it's already economically aboveground it's figured into share
prices, companies are borrowing money against it; nations are basing their budgets on the
presumed returns from their patrimony. It explains why the big fossil-fuel companies
have fought so hard to prevent the regulation of carbon dioxide those reserves are their
primary asset, the holding that gives their companies their value (McKibben, 5).

If we ever want our economy and society to flourish again, it is crucial that we come up
with new policies to implement to reverse the destruction. We need to decrease the inequalities
between the rich and poor, bring the cost of health care down and make it affordable, and limit
the obviation of the earth.
Policies I believe would address the situation of growing inequalities, underemployment,
and unemployment are to raise the minimum wage and encourage corporations to keep jobs
within the country. The current federal minimum wage is $7.25; this is nowhere near enough to
support a family. Contrary to what conservatives believe, capitalists are profiting from the
exploitation of workers. The productivity has been on the rise as are wages falling. The real
output GDP per production and non-supervisory workers have been on the constant rise since the
1950s, while the real weekly earning for production and non-supervisory workers have been on
the decline (S.O.W.A, 7). We need to raise the minimum wage so its an amount where an
individual can work a 40-hour week and remain above the poverty line while supporting a family
of 3. If we raise the minimum wage, people would feel less of a need to hold onto their liquid
assets and we would see an increase in aggregate demand. Also, the government should give
temporary tax cuts to people who need it the most which are people with low incomes to induce
consumer spending (Botwinick, Lecture 6, p 5).
In accordance with those suggestions, we need to find a way prevent the wealthy and
corporations from avoiding paying billions of dollars in taxes by moving their money overseas.
This situation has become so absurd that one five-story office building in the Cayman Islands is
now the home to more than 18,000 corporations (Sanders, 10). Also, there needs to be an effort
to get rid of tax breaks for companies shipping American jobs overseas. Our government
continues to reward companies that move American manufacturing jobs abroad, despite the fact

that million of American jobs have been outsource to China, Mexico, and other low wage
countries over the past decade. We need to keep these jobs in America to supply the people an
opportunity for employment to increase their income and boost our own economy. The Joint
Committee on Taxation has estimated that we could raise more than $582 billion in revenue over
the next decade by eliminating these offshore tax loopholes (Sanders, 10).
To address the issue of rising health care costs, we need to implement policies that get
more for their moneys worth. We are already spending about 18% of our entire economy on
health care, compared to 9.6% percent in all other rich countries, yet our life expectancy at birth,
78.2 years is shorter than theirs, averaging 79.5 years, and our infant mortality rate is 6.5 deaths
per 1000 live births, is higher than theirs which is 4.4 deaths per 1000 live births (Reich, 17).
This shows that we can spend less and still get decent health care. Evidence of this was showed
in Michael Moores movie Sicko. He got insight to other countries health care such as France,
United Kingdom, and Canada who have Universal Health Care. Also, American doctors have the
tendency to spend on unnecessary tests, drugs, and procedures. For example, almost 95 percent
of cases of lower back pain are best relieved by physical therapy. But, American doctors and
hospitals routinely do M.R.Is and then refer patients to orthopedic surgeons who often do even
more costly surgery (Reich, 17). I believe researching and weighing the negatives and positives
about possibly moving towards universal health care kind of health care would be worth it. It
may result in a tax increase, but I feel that for an area such as health care, it is essential for
everyone, rich or poor.
As for global climate change, we need to get control of these large corporations while
also limiting the amount of carbon being released by everyone else. If we are not on a radically
different energy path by the end of this decade, we are in for a world of pain (Klein, 5). I

believe implementing a carbon tax would significantly decrease the amount of carbon being
released. It is noted that a carbon tax of $25 per ton of emissions would cut the deficit by $1
trillion over a decade, according to the Congressional Budget Office (Spross, 47). The
government should put stricter regulations on large corporations by putting caps on how much
carbon corporations can release in our atmosphere and have an incentive such as subsidies for
corporations using renewable energy. Long haul transportation that consists of using jumbo jets,
cargo ships, and heavy trucks also releases an abundance of carbon and should be limited to only
cases where its impossible to grow the product locally or it is more carbon intensive. Also, we
should look into increasing taxes for the rich to help fund investments for more public
transportation. Having public transportation accessible and affordable to all can dramatically
decrease the amount of greenhouse gases being released into the atmosphere because it will deter
people from driving their cars, which is also a huge factor of the large presence of green house
gases in the atmosphere.
If we want to restore our economy and society, we have a lot of work to do. We must not
ignore the serious economic and social problems that we currently face such as high
unemployment and underemployment, extreme inequalities in wealth and income, rising health
care costs, and global climate change. We need a political leader who will not be afraid to voice
what is morally right, which is to tax who can afford to be taxed, while assisting the people who
truly need to be helped to create a fair environment in America. Also, we need to take control of
the global climate change to prevent us from literally destroying our planet.