Income disparity is not only hurting the 99%, it's hurting the whole American economy.
What does it take to get the 99% so angry that they will take action to redress the inequalities in our society? The evidence is clear. According to the recent CBO report, since the 1970’s income grew by 275% for the top 1% of households, 65% for the next 19%, just under 40% for the next 60 percent and just 18% for the bottom 20%. Other recent reports show that the top 20% of wealth holders control 85% of the nations wealth while the bottom 80% control the 15% that’s left. Yet today in the Washington Post in his OpEd piece Robert Samuelson claimed that “Contrary to liberal dogma, the rich already pay plenty of taxes. Indeed, they pay for government. In 2007, the richest 1 percent of Americans paid 28 percent of all federal taxes; the richest 10 percent (including the 1 percent) paid 55 percent. Yes, of course, but they control 85% of the wealth! And their tax burden has steadily decreased over the past 30 years. The top tax rate has fallen steadily over the years from a high of 90% to the current 36%. But the real difference maker for the top 1% has been the drop in the capital gains tax from 28% under Ronald Reagan to 20% under Bill Clinton to the current 15% under George W. Bush. But the real kicker is the loophole that allows hedge fund managers and other financial managers to claim their income as capital gains instead of regular income. Yes, the rich pay a lot of taxes. But they don’t pay their fair share.
What is really dizzyingly unfair is that while 14 million Americans are jobless and another 11 million Americans are underemployed, the lackeys of the rich in Congress continue to block any attempt to put Americans back to work if that attempt must be paid for with the tinniest increase in the taxes of the most well off. So while the wealthy vacation in Los Cabos, Mexico and contemplate the purchase of a fourth home on a tropical island somewhere, millions of Americans wonder how they are going to be able to pay their mortgage, put gas in their tanks and feed their children.
How does the message get through to those low information Americans who seem to have no idea that by supporting Republicans and Republican dogma they are digging themselves and the rest of America into an ever deeper whole. Because what is becoming more and more obvious is that this economy is never going to fully recover and be the dynamic wealth producing engine it can be until the disparity in earning power and wealth is balanced. Nicholas Kristof, in his OpEd piece in the New York Times this weekend says:
“In his important new book, “The Darwin Economy,” Robert H. Frank of Cornell University cites a study showing that among 65 industrial nations, the more unequal ones experience slower growth on average. Likewise, individual countries grow more rapidly in periods when incomes are more equal, and slow down when incomes are skewed. That’s certainly true of the United States. We enjoyed considerable equality from the 1940s through the 1970s, and growth was strong. Since then inequality has surged, and growth has slowed.”
It should be axiomatic that income disparity breads slow growth. If a few people have most of the money, then the rest are not going to have the money to buy the products and services that make the few rich. Americans were able to continue to buy stuff for a long time because they could borrow either through credit cards or by refinancing their homes. But when the housing bubble burst that all ended. Now the 99% are out of money and out of credit and they are saving like never before and paying down debt. They aren’t buying homes because they can’t sell the ones they currently own. They aren’t buying appliances, or cars, or other expensive items and they are saving where they can on the purchases they have to make to survive. GDP is level to barely moving. And it wouldn’t make a difference if all government regulation were dropped tomorrow morning, corporate taxes were dropped to zero, capital gains dropped to one percent and the rich were not taxed at all. Business isn’t going to hire one more person than they absolutely have to to produce the number of products and the amount of service they must provide to handle the demand for those products and services.
We need Republicans out and Democrats in. But is that going to happen? Probably not. Those low information voters are going to go to the polls and elect a Republican president and give him a Republican Senate and House. The disparity in income is going to get even worse and the economy is going to collapse. And when that happens, the Republicans will blame Obama, and they’ll get another four years and the situation will be even worse. I wonder if those who think that the current situation is just peachy will finally wake up then, get mad and take action to redress the disparity in wealth in America.