Populist Daily

Politics, Culture and American Life

Populist Daily header image 1

What Is Wrong with America? Part I—Economic Inequality

December 22nd, 2010 · 3 Comments · Politics

The United States has gone wrong. It has gone off the rails. When we have people who were in January living a normal life and by October have lost everything, we are not the United States of the 20th Century. Since 1980, average Americans have lost ground, or perhaps gained a few thousand dollars more in income a year while the very wealthy, the top one-tenth of one percent have become 25 times richer than they were.

The fastest growing incomes, as a percentage of growth, are those already making hundreds of millions of dollars a year. And the Neocon Republican Senate held up several million unemployment checks for weeks until they could get these top earners a tax break. These are tax breaks for people who could never spend the money they have now, let alone any additional funds.

One could make the argument that this is only those people who have been imprudent, who are unemployed or underemployed, but that would not be correct. The fact that a person in this country in this era did not attend college, go to law school or get an MBA…and sometimes even if they did…would not have relegated them to second-class citizenship. For generations, we have had a workforce that had less, not more, education than our current workforce. And they prospered.

That is not the United States that we developed in the 20th Century and culminated with the greatest and longest period of sustained prosperity of any country at any time in the history of the world…the 1990s…after President Clinton took office. And now, after Bush, 21 million people are unemployed and, according to Gallup, another 23 million are under employed, working part time or working at a job for which they are overqualified by education, experience or training. Working in a fast food establishment or a retail outlet instead of a factory or office.

Let’s be very accurate, because the opposition, that group of people who number no more than 150,000 or so, who are both extremely wealthy and are also very greedy, have the capacity of arguing with pinpoint accuracy and deadly efficiency against any arguments that they should make an economic sacrifice for others. They will pick apart any argument that life is unfair in this country, whether they earned their millions or inherited it.

And an overwhelmingly difficult aspect of the arguments of the rich is that they are, when they want to be, and with and to whom they want to be, unfailingly generous. The Koch Family…with a laser-like focus on destroying the capacity of Americans for health care, clean water and clean air…has donated hundreds of millions of dollars to hospitals, clinics, museums and god knows what else.

It is very difficult to argue against people who are trying to starve you, cause you to lose your home, or force you to live as an i you when they are unpredictable and seemingly irrational on Monday and generous and kind on Tuesday. But the fact is that the tea party rallies, which were first encouraged and organized by the Republican Party were funded and supported by the Koch Family Foundation. If health care reform is overturned, it will be in very large part the result of the tens of millions of dollars they spent in buses, and meals and signs and organizing offices, mailings and phone calls.

So let’s start off with income inequality. We are not talking about the equality as expressed in Socialism, Communism or Marxism but a return to the type of equality and opportunity that existed in our own society in the 1950s, when a Republican, Dwight D. Eisenhower, was President. At that time, millionaires paid a rate of 91% on income they earned over something like $500,000.

In 1960, as the current Neocons are so proud of representing, Jack Kennedy, on the advice of his father, dropped that top rate to 74%. Of course, if the Neocons are so proud of what Kennedy did, and his rationale, we should then return to a top rate of 74% and start from there. But of course they want a zero rate, so that wouldn’t work.

Talk about income inequality…how about tax inequality. There were about 27,000 millionaires in 1950, annual incomes of over $1,000,000 and of course that was a lot more money…hugely more…than one million is today. But those 27,000 were bearing the load. Today there are over 1.5 million millionaires in the U.S. and they pay an average of less than 30% on their entire incomes, including the top rate.

Surprisingly, however, taxes are not really the problem. For when we see that Bill Clinton was able to balance our budget by merely increasing taxes slightly…4% over the rates of the Reagan administration…and still balanced the budget and created 22 million new jobs in 8 years, and temporarily raised average incomes, it is clear that taxes alone did not do it. To erase income inequality, we need to do more than raise taxes on the rich.

Although we may have to do so in the short run. We are now running a shortfall of something like a trillion dollars a year. Here’s why. Under Bush I and Bush II, and Reagan, the federal revenues fell short of our expenditures by an average of about $300 billion a year. Over the terms of those Presidents, and accounting for the year 2009, although not the stimulus, that accounts for the roughly $12 trillion of the soon-to-be $14 trillion national debt. Almost all the debt, over 90% of it came during Reagan, Bush and Bush, while Clinton was pretty much a wash…deficits but also surpluses.

So in addition to the annual $300 billion in losses they left President Obama…structural deficits, Bush also left him a recession. That adds about $300 billion in social payments, like unemployment, plus a loss of about $300 billion in income taxes from those who are unemployed and from business (although all business…the total of all businesses, large and small…pays only about 7% of our total federal revenues.)

As a result, there is an additional to the deficit of $600 billion and when added to the structural deficit, plus other things such as attempted stimuli to try to get the economy going, plus two wars whose budgets are calculated annually…we get a deficit now of over $1 trillion a year. Can we do anything about it? Yes and no.

There are pretty standard things that we know. For example, we know that if a community starts up, because a plant is built, the workers need stores, dry cleaners, lawn care products, pet products, school supplies, etc. So we can artificially create that kind of circumstance nationally to kick-start the economy, end at least the $600 billion portion of the deficit in a couple of years…it doesn’t happen overnight.

But the Republicans in the Senate, even though they have only 40 members, have blocked every attempt to create jobs, to stimulate the economy, to create new industries and to shore up and resuscitate domestic industry.

They have filibustered…simply not allowed votes (because of a technicality almost never used before the second Bush Administration and the Neocons, the American version of Fascists, every single piece of legislation that would help Americans…over 240 filibusters of legislation to help get us out of the Great Bush Recession.
They did it for political reasons. The Neocons, the Fascists, now have control of 90% of the radio networks and about 25% of the television networks. They constantly put out a barrage of propaganda, not explaining what is happening, but what the rich want them to tell us is happening. It worked. The Republicans, the Fascists, by preventing any economic recovery from taking place have persuaded enough illiterates to vote for them to win back the House of Representatives and gain half a dozen seats in the Senate.

So how does inequality come about? Greedy, evil men…and they are evil and sinister…who only want more…more money and power than they can spend or use…take control of the reins of power…of media and of the influences on weak or corrupt politicians. That is where we are today.

So what does it mean for inequality? Well, in addition to the loss now of almost any political power to change the situation, corporate executives, CEOs, have gone from making 30 times what the average worker made in 1979, before Reagan came to office to now making over 300 times what the average worker makes…if he has a job. And they have gone from receiving income and bonuses equivalent to 22% of profits, to now receiving an astonishing 60% of profits! That’s where your money is going, your salary and your raises. To the CEO.

With health care insurance going up at the rate of over 15% per year, and services being cut and co-payments being increased…even on retired seniors in Medicare, who have not received any cost-of-living increases in two years…the Neocons are trying to roll back the health reform bill and have already said that they will withhold funds from its implementation as soon as they take over the House of Representatives.

Does deliberate cruelty, unabashed, unabated, wanton cruelty to children and the elderly make a politician evil? A disgusting human being? Of course you can decide that for yourself, but there are now 50 million, up from 30 million, Americans without health care for at least some portion of each year. How many are underinsured or how many whose insurance will drop them or not pay for services when they are sick or injured, we do not know. But it is in the multi-millions. We can be sure of that from past experience.

Today, if you subtract the value of real estate…people’s homes, many of which are now “under water” that is, worth less than the mortgage, the top one percent of people in this country, about 3 million people, possess 47% of all the financial wealth. So basically the rest of the wealth in the country, roughly half, is shared by the bottom 99%, or about 300 million people.

At the beginning of the Reagan Administration, people were doing pretty well. There were about 500,000 millionaires and probably a couple of billionaires. By 1988, there were 1,500,000 millionaires, 100,000 worth $10 million, 1,200 worth $100 million and 51 billionaires? Did a rising tide lift all boats? Did it lift your boat? Average unemployment during the Reagan administration was 7.5%…average.

The top 20% of the country has 80% of the annual income. So 80% have 20% of the income. The incomes of the top 400 people went up from an average of $263 million in 2006 to $344 million in 2007. So it is not just taxes. It is a effort to continue to separate the rich from the poor.

In the Reagan years, incomes of average Americans rose by about 44%, which, for example would mean someone making $20,000 over that decade would go to $28,000. But millionaire incomes rose by an astounding 2,000 percent. That means that they went from $1 million in income to $20 million in income.

CEO pay has grown by 300% in the last ten years while production workers pay has grown at 4.3%, not even enough to keep up with inflation. The average CEO pay for all businesses of a size to be recorded is $3.9 million per year. Of those in the Standard and Poor’s 500, the average pay is $10.6 million annually and of those on the Dow Jones Industrial Average it is $19.8 million.

How do executives get this kind of pay which is generally speaking hundreds of times what the average worker receives? They appoint the board of directors, who get paid to make judgments, among which is how much the CEO should be paid. With taxes in the effective 25% range, these executives are putting multiple millions in the bank each year, so that within 4 or 5 years, they not only work for the wealthiest Americans (that top 1% that owns 47% of all financial wealth (which includes corporate stocks) but they are then themselves among the wealthiest Americans.

So how do average Americans defend themselves? Several ways. One is unions. Unions offer the quickest and best means of organizing around the point of jobs, equal opportunity, and advancement thorugh training and education. The point that the supply-side economists make is a valid one. Milton Friedman would say that labor merely needs to continue to increase its value to the employer.

While that is true, at this point, it is not enough. Since 1981, union busting techniques have been accepted by the centrist politicians and actively pushed by the Right Wing politicians. And since the laws and the courts, and even public opinion, fostered by liars and paid Right Wing propagandists have had their effect, it is more and more difficult to fight against corporations. But it can be done and it must be done.

Ronald Reagan basically violated every tenet of the National Labor Relations Act in his attitude towards labor. Subsequent Presidents, including Clinton, have either attacked labor, or neglect the best interest of unions and all average workers. “Smaller government” has meant cutting back on regulators and labor law attorneys in the Labor and Justice Departments.

Bush the Lesser appointed as his labor secretary Elaine Chao. Elaine Chao is the daughter of a former Chinese warlord-connected Right Wing industrialist who left China after the revolution and settled in the U.S. on the affluent Northshore of Long Island and began a prosperous shipping business. Chao, after an upper-class business education was appointed to various government posts, became the second wife of Senator Mitch McConnell, declared on several occasions to be one of the most corrupt officials in Washington.

She was appointed to the post of Secretary of Labor, for which she had scan credentials except that she would do what she was told as a member of the Bush-Cheney inner circle and as a good Neocon Republican. Her tenure there was one of the great reasons for the current inequality in American life through her relentless efforts to dismantle the American labor movement and to downgrade the conditions and wages of American workers.

She first of all instituted investigations of all major union funding operations to require unions to spend much more time and money on accounting for unions dues. Much of the real effort at this had been done in the Clinton Adminsitration and before, but Chao’s effort was aimed at tying up unions with needless paperwork, which it succeeded in doing. She next did away with overtime pay for tens of millions of American workers, reclassifying them as the corporations wanted them reclassified so that they merely had to be given comp time (which, as supervisors, they never had the time to use.) Corporations were not required to compensate them with actual pay.

She then cut back on mine inspections to only about one in ten. This resulted in a doubling of mine deaths during her tenure. (Dick Cheney was not the only one causing deaths among Americans from his negligence.) She outsourced jobs that were often not done and understated the cost to the government. She used the employees of the Labor Department for political purposes in violation of the Hatch Act. Nothing was ever done about it.

In a study of over 70,000 cases of complaints against employers for failure to pay minimum wage, failure to pay overtime or failure to pay at all for periods of time, the Wage and Hour Division of the Labor Department under Chao failed to do anything at all.

Is it any wonder with a Dragon Lady, daughter of a former Chinese Nationalist-connected businessman and wife of one of the most corrupt Senators in Congress, adjudged so by serious watchdog groups, that American workers would be exploited? And is it any wonder that with this kind of exploitation by our own government, that worker versus corporation inequality continues to grow?

It is time for change. Serious change. A complete political revolution.

Tags: ···

3 Comments so far ↓

  • Party Supplies

    However, the attempts of the ANC to curb wealth inequalities have mostly failed. Party Supplies

  • Your Future

    “have the capacity of arguing with pinpoint accuracy and deadly efficiency against any arguments that they should make an economic sacrifice for others”

    Economic sacrifice? What the hell are you writing?

    It’s the other way around: it’s about time they stop economically sacrificing everyone else. If a vampire sucks a liter of your blood and gives back a few drops, do you call that a sacrifice?

    The only folks ‘sacrificing’ are the workers who aren’t being paid the value of their work, and those who have no work. This is what capitalism does, this is what capitalism is.

  • Joshaughn

    When the capitalist system is not free and unfettered competition, then workers are not paid the value of their work and others are deprived of the opportunity to work. That is the situation we are in today, where a small number of giant corporations control the markets in each industry from energy to food to communications to the media. And the media itself controls the message so that information on the control of financial institutions, major corporations, the military industrial complex and even such basic things as agriculture and health care–no longer in the hands of workers or any representation of workers, but of owners exclusively–never reaches the public. And now those who control these industries have found their lieutenants among the Neocon Republican Senators and House members.