Robert Reich---The Great Switch by the Super Rich [View All]

The Great Switch by the Super Rich

Tuesday, May 17, 2011

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So what are America’s super rich doing with all this money? They’re investing it all over the world, wherever they can get the best return for any given level of risk. Treasury bills – essentially loans to the U.S. government — have proven good and safe investments, particularly during these last few tumultuous years.

You hear a lot of worries about foreigners dumping Treasuries if they lose confidence in the dollar because of our future budget deficits. What you hear less about are these super-rich Americans, who are just as likely to abandon Treasuries if spooked by future budget deficits.

The great irony is if America’s super rich financed the U.S. government the way they used to – by paying taxes rather than lending the government money – that long-term budget deficit would be far lower.

This is why a tax increase on the super rich must be part of any budget agreement. Otherwise the great switch by the super rich will make the income and wealth gap far wider.



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http://robertreich.org/post/5583016733