The booming economy since the Great Recession
of 2008, amplified by Republican tax cuts that
gave corporations huge benefits, has begun to
raise hourly wages, but not significantly.
What Makes a “Healthy” Economy?
"The financial oligarchy go into the New
Year
celebrating their massive accumulation
of
wealth and the so-called mainstream
media
will continue to maintain the fiction
that the
US and, by extension, the global
economy,
remain sound. But the reality is that
the seeds
of another financial catastrophe have
not
only been planted but are rapidly
germinating."
What Makes a “Healthy” Economy?
The coronavirus pandemic shows that we don’t have one.
Wikimedia Commons
Last week, Janet Yellin, former chair of the Federal Reserve, gave an upbeat assessment of the pre-pandemic U.S. economy. “Very fortunately we started with an economy that was healthy before this hit,” she told the PBS NewsHour. “The banks were in good shape, the financial system was sound, Americans at least overall on average had relatively low debt burdens.”
But how “healthy” was that economy, really? How healthy is an economy whose workers have so little savings that they can’t make the rent after missing just a couple of paychecks? How healthy is an economy whose small businesses have so little cushion that they face almost instant obliteration when their cash flow is disrupted? How healthy is an economy where hourly employees performing many essential services earn so little that they have to go to work sick to keep their jobs? And how healthy is an economy whose housing costs force millions to cram into overcrowded homes in polluted slums replete with high stress, malnutrition, asthma, diabetes, heart problems, and other chronic disease?
“There’s nothing fundamentally wrong with our economy,” said Fed chairman Jerome Powell in March. It was “resilient,” he said in February. Yellin concurred, citing the old good news in her hope that the “economy will recover much more speedily than it did from any past downturn.”
Recover for whom? The experts look at conventional measurements, which painted a picture of prosperity before COVID-19. The unemployment rate last September hit a fifty-year low, at 3.5 percent, and the rate for people without a high school diploma dropped to a new low of 4.8 percent. The GDP had been growing within the range considered ideal—two to three percent—and Powell reported a rising willingness of employers to hire low-skilled workers and train them.
But alongside the bright figures on unemployment and job creation, consider a competing set of numbers from before the pandemic: The poverty-level wages for those who harvest our vegetables, cut our Christmas trees, wash our cars, cook and serve our food in restaurants, deliver groceries to our doors, clean our offices, and even drive our ambulances. The 14.3 million households (11.1 percent) uncertain that they could afford enough food, and the 5.6 million families (4.3 percent) where at least one person has had to cut back on eating during the year. The 14.3 percent of black children with asthma, double the rate in the population overall. The 20 percent of children living in crowded homes shared with other families or three generations of their own, and the 50 percent of urban children who have lived in those conditions by age nine.
A pernicious dynamic of financial stress is the unexpected link between housing costs and malnutrition. For many low-wage families without access to such government subsidies as Section 8 vouchers or affordable housing, rent can soak up 40 to 60 percent of income, which can leave too little for other necessities. You have to pay the rent. You have to pay the electricity, phone, and fuel bills. If you need a car to get to work, which the vast majority of employees do, you have to make the car payments. Those are not optional. The category that can be squeezed is for food, and that’s what many poor families have to do.
A result is childhood malnutrition. It sometimes manifests itself in obesity resulting from cheap, bad food, which in turn can promote diabetes. It compromises the immune system. Even more seriously, deprivation of nutrients such as iron during key periods of brain development, both before and after birth, can lead to lifelong cognitive impairment. Studies show that children who suffered iron deficiency as infants, even if they’re fed properly later, still suffer as adolescents, scoring lower in math, written expression, and selective recall. Their teachers see them displaying “more anxiety or depression, social problems, and attention problems,” according to a National Academy of Sciences report.
So when federal and state governments are stingy with housing subsidies, as they always are, they are effectively, perhaps unwittingly, damaging children’s brain development and life opportunities.
The booming economy since the Great Recession
of 2008, amplified by Republican tax cuts that
gave corporations huge benefits, has begun to
raise hourly wages, but not significantly.
If median hourly wages in certain jobs are put next to the official poverty line—currently $25,750 a year for a family of four—it’s clear why so many people are in desperate trouble so soon after the economy’s lockdown. Most poor families have only one wage earner, so assuming a full-time, 40-hour week, that person would have to be paid $12.38 an hour just to reach the poverty line. As of May 2019, according to the Bureau of Labor Statistics, the median hourly wage for ambulance drivers and assistants was just $12.45; for workers in retail sails, $11.37 to $12.14; for building cleaners, $12.68; for parking attendants, $12.11; and for fast-food and restaurant cooks and servers (some of whom also get tips), $11.00 to $12.45.
The lesson is to look beyond the unemployment rate and number of new jobs and examine how well those jobs pay. The “healthy” economy did little to narrow the wealth gap. The most recent Federal Reserve figures, from before the pandemic, showed the top 10 percent of households with a median net worth of $2,387,500 and the bottom 10 percent with minus $962—that is, they owed more than they owned.
Adding assets and subtracting liabilities as of the fourth quarter of 2019, the wealthiest 10 percent had 70 percent ($78.5 trillion) of the country’s total household net worth, and the bottom 50 percent had just 1.5 percent ($1.7 trillion). The top had miniscule debt, and the bottom half had miniscule financial assets alongside huge mortgage and consumer debt.
So, Janet Yellin was only partially right when she said that Americans had low debt burdens. Consumer debt reached a record high in 2019 of more than $14 trillion, according to Experian, the credit agency. But it was lower as a portion of income. And defaults and late payments were low enough to drive the average FICO score—a person’s credit rating—to a high of 703, up from 689 in 2010 at the end of the Great Recession. (A perfect score is 850.) Given the high credit card and other debt among the unwealthy, however, delinquency rates can now be expected to soar, pushing credit ratings down.
In that prospering economy, then, the glass was either half full or half empty, depending on whether you were looking from the top or from the bottom. There was no need to exaggerate the hardships at the bottom, as some Democratic candidates did with one misstated statistic.
BLOG: INTERESTINGLY HARRIS, WARREN AND SANDERS ALL WANT AMNESTY SO 40 MILLION ILLEGALS CAN BRING UP THE REST OF MEXICO. NOW DO THE MATH ON JOBS, HOUSING AND THE HOMELESS CRISIS
Senators Kamala Harris, Elizabeth Warren, and Bernie Sanders all said last year that 40 percent of Americans could not come up with the money to pay a $400 emergency expense. In fact, the contrary was the case, according to the Federal Reserve’s annual survey, “Report on the Economic Well-Being of U.S. Households.”
Asked to check all the ways they could pay for a $400 emergency, only 12 percent said they could not pay right now, 45 percent checked “with the money currently in my checking/savings account or with cash,” and 33 percent said they’d use a credit card and pay it off entirely at the next statement. To a follow-up question, 85 percent said that making the unexpected payment would not prevent their paying other bills.
On the other hand, 25 percent told the Federal Reserve that they were just getting by or finding it difficult to get by. That number is troubling enough, one bound to spike as stay-at-home orders continue. The economy was not “healthy” for those folks in the first place, and will not be so for many more.
Improvements will come not from the stalemate of left and right, or from their manipulating statistics, but from a new ideology of practical realism that honors the complex facts, without distortion. The free-market system is the one we have, and it can work for virtually everyone if everyone in government and business works for everyone. Too idealistic? Naïve? Probably.
THE REASON TRUMP IS NOT PROSECUTING EMPLOYERS OF
ILLEGALS IS TO KEEP WAGES DEPRESSED!
More Americans Are Going on Strike
For decades, the
decline of the American labor movement corresponded to a decline in major
strike activity. But new data released by the Bureau of Labor Statistics, or
BLS, indicates a recent and significant increase in the number of Americans who
are participating in strikes or work stoppages. As a report from the
left-leaning Economic Policy Institute explained on Tuesday, strike activity
“surged” in 2018 and 2019, “marking a 35-year high for the number of workers
involved in a major work stoppage over a two-year period.” 2019 alone marked
“the greatest number of work stoppages involving 20,000 or more workers
since at least 1993, when the BLS started providing data that made it possible
to track work stoppages by size.” Union membership is declining, but workers
themselves are in fighting shape.
EPI credits the
strike surge to several factors. Unemployment is low, which bestows some
flexibility on workers depending on their industry. If a work environment
becomes intolerable or an employer penalizes workers for striking or
organizing, a worker could find better employment elsewhere. (Though federal
labor law does prohibit employers from retaliating against workers for participating
in protected organizing activity, employers often do so anyway, and under
Trump, the conservative makeup of the National Labor Relations Board
disadvantages unions when they try to seek legal remedies for the behavior.)
The other reason
undermines one of Donald Trump’s central economic claims. Though the president
points to low unemployment as proof that his policies are successful, the
economy isn’t booming for everyone. Wage growth continues to
underperform.
People can find jobs, in other
words, but those jobs often don’t pay well. As
the costs of private health insurance rise,
adding another strain on household
budgets,
Americans are finding that employment and
prosperity are two separate
concepts.
Without a union,
exploited workers have few options at their disposal. They can take their
concerns to management, and hope someone in power feels pity. They can stage
some kind of protest, and risk the consequences. Or they can find another job,
and hope their new workplace is more equitable than the last. Lackluster wage
growth suggests that this last option is not as viable as some right-to-work
advocates claim. Unions afford workers more protection. Not only do they
bargain for better wages and benefits, union contracts typically include
just-cause provisions, which make it more difficult for managers to arbitrarily
fire people for staging any sort of protest at work. Discipline follows a set
process, which gives a worker chances to improve. Retaliation still happens,
but would likely happen more often were it not for union contracts, which are
designed to act as a layer of insulation between workers and managers with ill
intent.
The new BLS data
reveals that despite their relatively small numbers, unionized workers are
exercising the power afforded them by their contracts. Elected officials ought
to listen to what this activity tells them. A strike wave is a symptom that the
economy is actually not as healthy as it superficially looks. Nobody withholds
their labor unless they’ve exhausted all other options. Strikes and stoppages
stem from exasperation, sometimes even desperation. Workers know they’re
playing a rigged game, and they’re running out of patience.
“The remarkable thing is how weak wages are, how weak the
economy is, given that as a result of the tax bill we have a $1 trillion
deficit.”
Donald Trump is ‘just wrong’
about the economy, says Nobel
Prize-winner Joseph Stiglitz
President Donald Trump told business and political
leaders in Davos, Switzerland last week that the economy under his tenure has
lifted up working- and middle-class Americans. In a newly released interview,
Nobel Prize-winning economist Joseph Stiglitz sharply disagreed, saying Trump’s
characterization is “just wrong.”
“The Washington Post has kept a tab of how many lies and
misrepresentations he does a day,” Stiglitz said of Trump last Friday at the
annual World Economic Forum. “I think he outdid himself.”
In Davos last Tuesday, Trump said he has presided over a
“blue-collar boom,” citing a historically low unemployment rate and surging
wage growth among workers at the bottom of the pay scale.
“The American Dream is back — bigger, better, and stronger than
ever before,” Trump said. “No one is benefitting more than America’s middle
class.”
Stiglitz, a professor at Columbia University who won the Nobel
Prize in 2001, refuted the claim, saying the failure of Trump’s economic
policies is evident in the decline in average life expectancy among Americans
over each of the past three years.
“A lot of it is what they call deaths of despair,” he says.
“Suicide, drug overdose, alcoholism — it’s not a pretty picture.”
The uptick in wage growth is a result of the economic cycle, not
Trump’s policies, Stiglitz said.
“At this point in an economic recovery, it’s been 10 years since
the great recession, labor markets get tight, unemployment gets lower, and that
at last starts having wages go up,” Stiglitz says.
“The remarkable thing is how weak wages are, how weak the
economy is, given that as a result of the tax bill we have a $1 trillion
deficit.”
As the presidential race inches closer to the general election
in November, Trump’s record on economic growth — and whether it has resulted in
broad-based gains — is likely to draw increased attention.
BLOG: THE GREATEST TRANSFER OF WEALTH TO THE RICH OCCURRED
DURING THE OBAMA-BIDEN BANKSTER REGIME
“The middle class is getting killed; the middle class is getting
crushed," former Vice President Joe Biden said in a Democratic
presidential debate last month. "Where I live, folks aren't measuring the
economy by how the Dow Jones is doing, they're measuring the economy by how
they're doing," added Pete Buttigieg, a Democratic presidential candidate
and former Mayor of South Bend, Indiana.
Trump has criticized Democrats for tax and regulatory policies
that he says will make the U.S. less competitive in attracting business
investment.
“To every business looking for a place where they are free to
invest, build, thrive, innovate, and succeed, there is no better place on Earth
than the United States,” he said in Davos.
Stiglitz pointed to Trump’s threats last week of tariffs on
European cars to demonstrate that turmoil in U.S. trade relationships may
continue, despite the recent completion of U.S. trade deals in North America
and China.
“He can’t help but bully somebody,” Stiglitz said.
Max Zahn is a reporter for Yahoo Finance. Find hi
TRUMPERNOMICS:
Billionaires’ wealth surged in 2019
28
December 2019
As the second decade of
the 21st century comes to a close, its most salient feature—the plundering of
humanity by a global financial oligarchy—continues unabated.
Amidst trade war and
the growth of militarism and authoritarianism on the one side, and an eruption
of international strikes and protests by the working class against social
inequality on the other, the stock market is hitting record highs and the
fortunes of the world’s billionaires are continuing to surge.
On Friday, one day
after all three major US stock indexes set new records, Bloomberg issued its
end-of-year survey of the world’s 500 richest people. The Bloomberg
Billionaires Index reported that the oligarchs’ fortunes increased by a
combined total of $1.2 trillion, a 25 percent rise over 2018. Their collective
net worth now comes to $5.9 trillion.
To place this figure in
some perspective, these 500 individuals control more wealth than the gross
domestic product of the United States at the end of the third quarter of 2019,
which was $5.4 trillion.
The year’s biggest
gains went to France’s Bernard Arnault, who added $36.5 billion to his fortune,
bringing it above the rarified $100 billion level to $105 billion. He knocked
speculator Warren Buffett, at $89.3 billion, down to fourth place. Amazon boss
Jeff Bezos lost nearly $9 billion due to a divorce settlement, but maintained
the top position, with a net worth of $116 billion. Microsoft founder Bill
Gates gained $22.7 billion for the year and held on to second place at $113
billion.
The 172 American
billionaires on the Bloomberg list added $500 billion, with Facebook’s Mark
Zuckerberg recording the year’s biggest US gain at $27.3 billion, placing him
in fifth place worldwide with a net worth of $79.3 billion.
It is difficult to
comprehend the true significance of such stratospheric sums. In his 2016
book Global Inequality, economist Branko Milanovic wrote:
"A billion dollars
is so far outside the usual experience of practically everyone on earth that
the very quantity it implies is not easily understood… Suppose now that you
inherited either $1 million or $1 billion, and that you spent $1,000 every day.
It would take you less than three years to run through your inheritance in the
first case, and more than 2,700 years (that is, the time that separates us from
Homer’s Iliad) to blow your inheritance in the second case."
The vast redistribution
of wealth from the bottom to the top of society is the outcome of a
decades-long process, which was accelerated following the 2008 Wall Street
crash. It is not the result of impersonal and simply self-activating processes.
Rather, the policies of capitalist governments and parties around the world,
nominally “left” as well as right, have been dedicated to the ever greater
impoverishment of the working class and enrichment of the ruling elite.
In the US, the top one
percent has captured all of the increase in national income over the past two
decades, and all of the increase in national wealth since the 2008 crash.
The main mechanism for
this transfer of wealth has been the stock market, and the policies of the US
Federal Reserve and central banks internationally have been geared to providing
cheap money to drive up stock prices. The cost of this massive subsidy to the
financial markets and the oligarchs has been paid by the working class, in the
form of social cuts, mass layoffs, the destruction of pensions and health
benefits, and the replacement of relatively secure and decent-paying jobs with
part-time, temporary and contingent “gig” positions.
Since Trump was
inaugurated in January of 2017, pledging to slash corporate taxes, lift regulations
on big business and dramatically increase the military budget, the Dow has
surged by 9,000 points. This year, Trump and the financial markets applied
massive pressure on the Fed to reverse its efforts to “normalize” interest
rates. The Fed complied, carrying out three rate cuts and repeatedly assuring
the markets it had no plans to raise rates in 2020.
This windfall for the
banks and hedge funds was supported by the Democrats no less than the
Republicans. In fact, Trump’s economic policy has been given de facto support
by the Democratic Party all down the line—from his tax cuts for corporations
and the rich to his attack on virtually all regulations on business. Even in
the midst of impeachment—carried out entirely on the grounds of “national security”
and Trump’s supposed “softness” toward Russia—the Democrats have voted by wide
margins for Trump’s budget, his anti-Chinese US-Mexico-Canada trade pact and
his record $738 billion Pentagon war budget.
This has included
giving Trump all the money he wants to build his border wall and carry out the
mass incarceration and persecution of immigrants.
Trump’s pro-corporate
policies are an extension and expansion of those pursued by the Obama
administration. It allocated trillions in taxpayer money to bail out the banks
and flooded the financial markets with cheap credit, driving up stock prices,
while imposing a 50 percent across-the-board cut in pay for newly hired
autoworkers in its bailout of General Motors and Chrysler. Obama oversaw the
closure of thousands of schools and the layoff of hundreds of thousands of
teachers, and enacted austerity budgets that slashed social programs.
Two of those running
for the 2020 Democratic presidential nomination are billionaires—Tom Steyer and
Michael Bloomberg. The latter, with a net worth of $56 billion, is the ninth
richest person in the US. He entered the race as the spokesman for oligarchs
outraged over talk from Bernie Sanders and Elizabeth Warren of token tax
increases on the super-rich.
The oligarchs are not
frightened by Sanders and Warren—two longstanding defenders of the American
ruling class, who seek to mask their subservience to capital with talk of
making the oligarchs pay “their fair share,” a euphemism for defending their
right to pillage the population. The billionaires are frightened by the growth
of mass opposition to capitalism that finds a distorted expression in support
for the phony “progressives” in the Democratic fold.
Between them, Bloomberg
and Steyer have already spent $200 million of their own money in an effort to
buy the election outright.
The impact of the
policy of social plunder is seen in the deepening of a malignant social crisis
in country after country. In the US, society is marching backwards, as the
crying need for schools, hospitals, affordable housing, pensions, the
rebuilding of decrepit roads, bridges, transportation, flood control, water and
sewage, fire control and electricity grids is met with the official response:
“There is no money.”
The result? Three
straight years of declining life expectancy, record addiction and suicide
rates, devastating wildfires and floods, electricity cut-offs by profiteering
utility companies. And a climate crisis that cannot be addressed within the
framework of a system dominated by a money-mad plutocracy.
Not a single serious
social problem can be addressed under conditions where the ruling elite—through
its bribed parties and politicians, aided by its pro-capitalist trade unions
and backed up by its courts, police and troops—diverts resources from society
to the accumulation of ever more luxurious yachts, mansions, private islands
and personal jets.
The watchword must
be—in opposition to the Corbyns, the Sanders, the Tsiprases and their
pseudo-left promoters—“Expropriate the super-rich!”
Bloomberg:
2019 a Good Year for Wealthy; Jeff Bezos Remains on Top Despite $9 Billion Loss
in Divorce
For the already wealthy and those
who struck gold for the first time, 2019 was a good year for the rich.
Bloomberg News’ billionaire index
is reporting on the money
made this past year, including Amazon founder and Washington Post owner Jeff
Bezos remaining on the top of the heap despite a divorce settlement with his
ex-wife that led to a $9 billion decrease in his portfolio:
The leveraging of a giant
social-media presence, a catchy tune about a family of sharks and a burgeoning
collection of junkyards are just a few of the curious ways that helped make
2019 a fertile year for fortunes to blossom around the world.
Kylie Jenner became the youngest
self-made billionaire this year after her company, Kylie Cosmetics, signed an
exclusive partnership with Ulta Beauty Inc. She then sold a 51% stake for $600
million.
It has been almost two months since
the Washington Nationals captured their first World Series championship, but
people around the world are still singing along to the baseball team’s adopted
rallying cry: “Baby Shark, doo-doo doo-doo doo-doo.” The Korean family that
helped popularize the viral earworm are now worth about $125 million.
The new wealthy includes Willis
Johnson of Oklahoma who has amassed a $1.9 billion fortune from building a
network of junkyards that sell damaged automobiles, according to Bloomberg
News.
Bloomberg reported that the 500
wealthiest people around the world added $1.2 trillion to their wealth,
“boosting their collective net worth 25 percent to $5.9 trillion.”
“Leading the 2019 gains was France’s
Bernard Arnault, who added $36.5 billion as he rose on the Bloomberg index to
become the world’s third-richest person and one of three centibillionaires —
those with a net worth of at least $100 billion,” Bloomberg reported.
Ironically, Bezos was one of 52
people who had a decline in their fortune, in his case because of a divorce
settlement with MacKenzie Bezos who is now on the billionaires list ranking No.
25 with a net worth of $27.5 billion.
Bloomberg reported on the winners:
- The 172 American billionaires on the
Bloomberg ranking added $500 billion, with Facebook Inc.’s Mark Zuckerberg
up $27.3 billion and Microsoft Corp. co-founder Bill Gates up $22.7
billion.
- Representation from China continued to
grow, with the nation’s contingent rising to 54, second only to the U.S.
He Xiangjian, founder of China’s biggest air-conditioner exporter, was the
standout performer as his wealth surged 79 percent to $23.3 billion.
- Russia’s richest added $51 billion, a
collective increase of 21 percent, as emerging-market assets from
currencies to stocks and bonds rebounded in 2019 after posting big losses
a year earlier.
And “losers”:
- Rupert Murdoch’s personal fortune
dropped by about $10 billion after proceeds from Walt Disney Co.’s
purchase of Fox assets were distributed to his six children, making them
billionaires in their own right.
- Interactive Brokers Group Inc.’s Thomas
Peterffy saw his wealth slump by $2.1 billion as investors weighed a
reshaped competitive landscape for brokerage businesses after rival
Charles Schwab Corp. eliminated commissions and agreed to buy TD
Ameritrade Holding Corp.
- WeWork’s Adam Neumann saw his fortune
implode — at least on paper — as the struggling office-sharing company’s
valuation dropped to $8 billion in October from an estimated $47 billion
at the start of the year. Still, SoftBank Group Corp.’s rescue package
left Neumann’s status as a billionaire intact.
And the new billionaires:
- White Claw, the “hard seltzer” that was
the hit of the summer among U.S. millennials, helped boost Anthony von
Mandl’s net worth to $3.6 billion.
- Mastering the art of fast-food
deliveries proved rewarding for Jitse Groen, whose
soaring Takeaway.com NV lifted his wealth to $1.5 billion.
- The popularity of soy milk gave eight
members of Hong Kong’s Lo family a combined $1.5 billion.
A new Gilded Age
has emerged in America — a 21st century version.
The
wealth of the top 1% of Americans has grown dramatically in the past four decades, squeezing both
the middle class and the poor. This is in sharp contrast to Europe and Asia,
where the wealth of the 1% has grown at a more constrained pace.
The Lessons of Theodore Roosevelt
To get out of our Second Gilded Age, look no
further than how we got out of the first one.
We’ve been rocked by
scandals over the past year involving the nation’s most wealthy and powerful.
We’ve learned that a twisted multimillionaire allegedly procured and raped
girls in his Manhattan mansion and on his private Caribbean Island; entitled
celebrities and corporate plutocrats paid millions of dollars in bribes to get
their kids into elite universities; pillars of the Hollywood and media
establishments have used their stature to sexually prey upon underlings; and,
yes, our president was caught lying about possibly violating campaign finance
laws with hush money payoffs to a porn star and Playboy bunny.
This
moral corruption is accompanied by the regressive government policies of a
scandal-stained administration. President Donald Trump is rolling back programs
that protect consumers, voting rights, the environment, and competitive
commerce faster than Congress can issue subpoenas. His cabinet includes
17 millionaires, two centimillionaires, and one billionaire with a combined
worth of $3.2 billion, according to Forbes. He presides over the most
corrupt administration in American history, one marked by nepotism and
self-dealing. His so-called “A Team” of senior officials has undergone a record
75 percent turnover since he took office—most of whom
resigned under pressure, often caught up in
scandal.
Commerce
Secretary Wilbur Ross, whose net worth is estimated at $600 million, reflected the arrogance and empathy
deficit that typifies the Trump White House during last winter’s record-long
government shutdown. He suggested that federal workers just take out loans
until they got paid.
But
nobody tops the swamp king, Trump himself. Forget the sleaze, forget the
obstruction of justice, forget the constant dissing of Congress. His defying
the Constitution’s emoluments clause alone would, in a normally functioning
American democracy, make him the subject of impeachment. Instead, he flouts the
rules as if they don’t apply to him. If he gets his way and hosts next year’s
G-7 summit at Mar-a-Lago, we may as well send the Constitution to the shredder.
And yet, as more recent controversies have shown us, including the Varsity
Blues college admissions scandal and Jeffery Epstein’s sex trafficking racket,
this kind of indifference to moral values is not confined to government
grandees.
So,
what gives? Is America drowning in a marsh of unchecked corruption and
entitlement brought on by latter-day Louis XVI’s and Marie Antoinettes? Are the
uber-wealthy out of control? There’s something rotten in America and, if we
don’t fix it soon, we invite a new wave of national decline and social
disintegration.
The
good news is that we have faced similar challenges before. Some prescriptions
from a previous era may provide a lodestar for a future Democratic president to
steer the country in the right direction. As Mark Twain, who coined the term
“the Gilded Age,” once said, “The external glitter of wealth conceals a corrupt
political core that reflects the growing gap between the very few rich and the
very many poor.” He was talking about the original Gilded Age, but that
diagnosis could just as easily apply to our current American condition.
The
first Gilded Age was marked by rapid economic growth, massive immigration,
political corruption, and a high concentration of wealth in which the richest
one percent owned 51 percent of property, while the bottom 44 percent had a
mere one percent. The oligarchs at the top were popularly known as “robber
barons.”
Theodore
Roosevelt, who was president at the time, understood that economic inequality
itself becomes a driver of a dysfunctional political system that benefits the
wealthy but few others. As he once famously warned, “There can be no real political democracy unless there is
something approaching economic democracy.”
His
response to the inequities of his times, which came to define the Progressive
Era, have much to teach us now about how to sensibly tackle economic
inequality. It’s worthwhile to closely examine the Rooseveltian playbook. For
instance, his “Square Deal” made bold changes in the American workplace,
government regulation of industry, and consumer protection. These reforms
included mandating safer conditions for miners and eliminating the spoils
system in federal hiring; bringing forty-four antitrust suits against big
business, resulting in the breakup of the largest railroad monopoly, and
regulation of the nation’s largest oil company; and passing the Meat Inspection
Act and Pure Food and Drug Act, which created the FDA. He prosecuted more than twice as many antitrust suits
against monopolistic businesses than his three predecessors combined, curbing
the robber barons’ power. And he relentlessly cleaned up corruption in the
federal government. One-hundred-forty-six indictments were brought against a
bribery ring involving public timberlands, culminating in the conviction and
imprisonment of a U.S. senator, and forty-four Postal Department employees were
charged with fraud and bribery.
Now,
we are in a Second Gilded Age, facing many of the same problems, and, in some
ways, to an even greater degree. The gap between the rich and everyone else is
even greater than it was during the late 19th Century, when the richest two
percent of Americans owned more than a third of the nation’s wealth. Today, the
top one percent owns almost 40 percent of the nation’s wealth, or more than the
bottom 90 percent combined, according to the
nonpartisan National Bureau of Economic Research. The first Gilded Age saw the
rise of hyper-rich dynastic families, such as the Rockefellers, Mellons,
Carnegies, and DuPonts. Today, three individuals—Jeff Bezos, Bill Gates, and
Warren Buffett—own more wealth than the bottom half of the country combined.
And three families—the Waltons, the Kochs, and the Mars—have enjoyed a nearly
6,000 percent rise in wealth since Ronald Reagan took the oath as president,
while median U.S. household wealth over the same period has declined by three percent.
The
consequences of this wealth gap are dire. Steve Brill explains in his book Tailspin that, by
manipulating the tax and legal systems to their benefit, America’s most
educated elite, the so-called meritocracy, have built a moat that excludes the
working poor, limiting their upward mobility and increasing their sense of
alienation, which then gives rise to the populist streak that allowed
politicians like Trump to captivate enough of the American electorate.
Similarly,
psychologist Dacher Keltner’s research shows that power in and of itself is a
corrupting force. As he documents in The Power Paradox, powerful people
lie more, drive more aggressively, are more likely to cheat on their spouses,
act abusively toward subordinates, and even take candy from children. Too
often, they simply do not respect the rules.
For
example, in monitoring an urban traffic intersection, Keltner found that
drivers of the least expensive vehicles virtually always yielded
to pedestrians, whereas drivers of luxury cars yielded only about half of the
time. He cites surveys covering 27
countries that show that rich people are more likely to admit that it’s
acceptable to engage in unethical behavior, such as accepting bribes or
cheating on taxes.“The experience of power might be thought of as having
someone open up your skull and take out that part of your brain so critical to
empathy and socially appropriate behavior,” says Keltner.
That’s
why we need to reform our political system if we are to survive the rampant
amorality and lawlessness of the Second Gilded Age. Simply put, so very few
should not wield so much sway over so many.
One
of the first priorities of an incoming administration should be to narrow the
wealth and income gap. French economist Thomas Picketty favors a progressive
annual wealth tax of up to two percent, along with a progressive income tax as
high as 80 percent on the biggest earners to reduce inequality and avoid
reverting to “patrimonial capitalism” in which inherited
wealth controls much of the economy and could lead essentially to oligarchy.
The
leading 2020 Democratic candidates favor raising taxes, as well. Elizabeth
Warren has proposed something commensurate to Picketty’s two percent wealth tax
for those worth more than $50 million, and a three percent annual tax on
individuals with a net worth higher than $1 billion. She has also proposed
closing corporate tax loopholes. Joe Biden wants to restore the top individual
income tax rate to a pre-Trump 39.6 percent and raise capital gains taxes.
Bernie Sanders has proposed an estate tax on the wealth of the top 0.2 percent
of Americans.
Following
Theodore Roosevelt’s example, we need to aggressively root out the tangle of
corruption brought on by Trump and his minions. This has already begun with
multiple and expanding investigations led by House Democrats into the
metastasizing malfeasance within the Trump administration. Trump’s successor,
however, should work with Congress to appoint a bipartisan anti-corruption task
force to oversee prosecutions and draw up reform legislation to prevent future
abuses.
“Of
all forms of tyranny, the least attractive and the most vulgar is the tyranny
of mere wealth, the tyranny of a plutocracy,” Roosevelt once warned. The free
market has made America the great success it is today. But history has shown
that unconstrained capitalism and a growing wealth gap leads to an unhealthy
concentration of wealth in the hands of a few. When the gap between the haves
and the have-nots goes unchecked, populism takes hold, leading to the election
of dangerous demagogues like Trump, and the disastrous politics they bring with
them. It is not too late to reverse course. But first, we need to re-learn the
lessons from our first Gilded Age if we are going to get out of the current
one.
Economists:
America’s Elite Pay Lower Tax Rate Than All Other Americans
The wealthiest Americans are paying a lower
tax rate than all other Americans, groundbreaking analysis from a pair of
economists reveals.
For the first time on record, the
wealthiest 400 Americans in 2018 paid a lower tax rate than all of the income
groups in the United States, research highlighted by the New York Times from
University of California, Berkeley, economists Emmanuel Saez and Gabriel
Zucman finds.
The analysis concludes that the country’s
top economic elite are paying lower federal, state, and local tax rates than
the nation’s working and middle class. Overall, these top 400 wealthy Americans
paid just a 23 percent tax rate, which the Times‘ op-ed columnist David Leonhardt notes
is a combined tax payment of “less than one-quarter of their total income.”
This 23 percent tax rate for the
rich means their rate has been slashed by 47 percentage points since 1950 when
their tax rate was 70 percent.
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