Media pundits in the United States tell this story over and over again, about the people who are taking “your” money. The story dates back to at least Reagan, when he perfected the story of the evil “welfare queen,” a black woman who somehow drives around in a Cadillac decked out in furs. She also dines on steaks while you work.
During the last election, I heard versions of this story again and again from conservatives. People have told me that 52 percent of the population doesn’t work nor wants to work. Many believe the problem is that people just don’t want to work and that we need to get them off welfare. This is much of the hostility behind the hatred of Obamacare—the feeling that people are getting something for nothing while the “good” people of America are working their butts off.
When a robbery has been committed, one of the things you can look for is: who has the stolen goods? Who has the money?
This is where I usually start when telling people the story about who actually took our money.
Who has the wealth in the United States?
The top .1 percent of Americans own as much wealth as the bottom 90 percent.
I don’t see any welfare queens in this story. This looks more like Wall Street queens.
Why this is a problem when it comes to our country
The easiest way to think about this is to look around you. As wealth shifts upward, people get poorer. More people struggle to make ends meet. People have to work harder for less money. People have less leisure time.
What made America great was that we used to have a strong middle class. I always think about the intro to All in the Family where the camera pans down a row of middle class houses in Queens.
Since the 1970s, however, what’s happened is that wages have stagnated even as productivity rose.
What does this mean?
It means you are working more for less. It also means that someone else is reaping the benefits of your work.
That someone else is Wall Street and the 1 percent.
Corporate America is turning labor into a commodity
What this means is that people themselves don’t have the value to corporations that they used to. We see this happening in technology, training, and through sending jobs overseas.
Technology such as computers and the Internet has made it possible for companies to move many functions to areas overseas where they can pay people less—and where they don’t have to provide them benefits.
In many situations, software and/or automation are actually replacing people who used to hold these job positions. A couple of the more common examples that have made the news recently are McDonalds using automated kiosks and Amazon’s recent announcement of grocery stores with no checkout lines.
This is happening in industry after industry—from information technology, where much of the function of IT staff has been replaced with automation and/or new cloud services (that require fewer human resources) to law (where companies like LegalZoom are productization lawyer services).
By and large most of the innovations over the last 30 years have been innovations that succeed because they make something more efficient (less human resources) and deliver higher returns to corporations (workers get less, and those people at the top get more).
Or, as Marc Andreessen famously said, “Software is eating the world.”
Tax cuts for the wealthy go straight to Wall Street
In 1978, Jude Wanniski penned the article “A Bull Market Scenario” in the Wall Street Journal. The question he asked was:
What will it take to get the Dow Jones Industrial Average to a level of 3000 or 4000 by the early 1980s?
Wanniski believed the U.S. could recreate the conditions from 1921 to 1929 under Calvin Coolidge that led to a nearly five-fold rise in the stock market. Coolidge believed “generally speaking, the business of the American people is business” and lowered taxes to the point where in 1927, only the wealthiest 2 percent of taxpayers paid any federal income tax.
Wanniski’s idea was to duplicate the Coolidge plan:
As in the 1920’s, we can expect a gradual, then accelerating dismantling of the government barriers between effort and reward. An era of incentives. The most important of these barriers are the now unnecessarily high federal tax rates on capital gains, personal incomes, and gifts and estates. Also a diminution of federal regulatory barriers to commerce.
Sound familiar?
If you want the stock market to go up, the way to do this is to cut taxes on the wealthy and corporations (the capital gains tax, income taxes, corporate taxes, estate taxes, etc.). These taxes are taxes on accumulated wealth and capital. If you want to juice the stock market, eliminate taxes on accumulated wealth and capital.
Certain tax cuts benefit Wall Street and the wealthy.
We will be told that these tax cuts will be for everyone. They won’t. The 1 percent will raise taxes on the 99 percent. Why? Because they still want all the benefits that taxes pay for. They want the roads and bridges. They want the police protection. They want the military. They want the legal systems and services that support and keep the wealthy wealthy. The wealthy just don’t want to pay for these services.
No jobs are created
The reason is simple when you think about it: basic supply and demand. Businesses hire (increase supply) when there is more demand.
Sure, they might invest to make a business more efficient, but this also tends to eliminate jobs (see above) rather than create them.
This is what is happening right now in states like Ohio. We’ve cut taxes again and again for the wealthy and the “magic” promised by corporate special interests has never materialized. Simultaneously, Ohio has cut government spending. Just this week, Gov. John Kasich announced that Ohio is on the verge of recession due to massive drops in state revenue from all the tax cuts for the wealthy.
Why?
Cutting taxes and reducing spending does little but juice Wall Street, just like Jude Wanniski said when he helped come up with the ideas behind Reagan’s supply-side economics. They were never intended to create jobs or build a strong middle class.
And Wall Street invests in eliminating jobs and creating businesses that increasingly do more with less and return ever greater profits to the 1 percent.
Tax the rich
I’m telling this story because it was a story I didn’t hear nearly enough during the election. I think we held off telling this story to focus on the many issues with Trump.
I didn’t think the opposition would be able to tell a better populist story. I was wrong—at least from the people I speak with frequently here in the Midwest. In the vacuum about what was happening, Trump claimed the “populist” mantle.
If state budget cuts are sending states like Ohio into recession, the simplest thing to do would be to increase taxes on the wealthy and increase public spending.
This would subsequently lead to a more equitable country and we could reinvest in our country’s infrastructure, our crumbling roads, our bridges that are falling apart, new public transit systems, technology centers, universities, and other infrastructure that actually creates good paying new jobs.
In order to accomplish this, however, we need to start with a story about where the money is actually going.
David Akadjian is the author of The Little Book of Revolution: A Distributive Strategy for Democracy (ebook now available).