Toward a More Perfect Union: A Prescriptive Approach — Economics
IV. Economics
Economics and Economic Inequality
So much has been said about the increasing degree of economic inequality. Suffice it here to point out that the relative wealth of the middle class has stagnated since 1975-1980, the relative wealth of the working and lower class has declined, and the wealth of the top 1% has skyrocketed to something closing in on the range of 1000% of what it was 40-odd years ago. Today, something close to 50% of our wealth is monopolized by less than 1% of our population.
By way of contrast, during the 1950’s the top income bracket was taxed at over 90%. Today it is less than 40%. Even in the ‘50s, the wealthy lived well and did not suffer. Experience shows that a truly graduated tax based on ability to pay is not only fair but is beneficial for our economy. The reason for this is that the economy prospers when ordinary citizens can afford things like homes, cars, food, leisure, and clothing without undue difficulty. In short, the economic engine of our economy is the ability of the non-wealthy, as well as the wealthy, to purchase goods and services. Even the ultra-right-wing Henry Ford knew this when he priced his Model T fairly and paid his workers enough to buy a car.
What is needed now is:
- Rescind the tax cut scam that the GOP passed in December 2017 where virtually all the wealth is diverted to the super-rich, and the national debt and deficit are ballooning in a way that is certain to lead to a recession or depression that will affect our descendants for many generations.
- Pass tax reforms that help, rather than hinder, the middle class by taxing the wealthy enough to help the government in its mission to assist the middle and working classes in covering their social and economic needs.
- Close tax loopholes that allow the wealthy to hide money in overseas accounts to avoid taxes and strengthen the IRS so that it can enforce its regulations. The IRS must also be overseen by congress so that it does not overstep its authority and unduly harass honest taxpayers.
- Instead of weakening or rescinding banking regulations such as Dodd-Frank or Glass-Steagall, we need to create stronger regulations that will keep banks and similar entities from preying on the public. After the 2008 recession, rules were made in the attempt to insure that no financial giant was “too big to fail.” Unfortunately, GOP efforts to undermine that effort have allowed financial giants to continue their growth, and we are now even more vulnerable than in 2008. Hence, we need to either (a) give more teeth to Dodd-Frank, or (b) create new legislation that is stronger in regulating banks. An amendment that requires congressional oversight of banks and limits their size would be appropriate. The amendment should also allow congress to take financial institutions into receivership under these conditions.
Monopolies and Trusts
The concentration of wealth in the hands of the few creates an oligarchy where those with money dominate the political climate. Today’s concentration of wealth is rivaled in our history only by the Gilded Age of the 1890’s and early 1900’s. At that time, the oil industry under Rockefeller worked closely with the railroad titans such as Vanderbilt and the New York financial titans such as Morgan. Their collaborative efforts led to monopolies that controlled the prices of oil, freight, interest and mortgage, and other necessities of life.
Under Theodore Roosevelt’s trust-busting tactics and Franklin Roosevelt’s New Deal, the power and influence of these monopolies was reduced. TR succeeded in breaking up Standard Oil and setting limits on the power of the railroads in 1905-6. In 1933 significant restrictions were placed on banks with the Glass-Steagall Act. The power and influence of unions in mining and manufacturing between 1930 and 1960 greatly improved the well-being of the working class. The introduction of the GI Bill and the FHA spurred the growth of the middle class.
Unfortunately, we seem to have forgotten the lessons of history. The myth of the beneficial effect of raw capitalism has been repeated enough times to have sunk into the cultural consciousness of our citizenry. Capitalism has many good points and can benefit many, but only when properly restrained and controlled by government. The idea that capitalism = “good” and socialism = “bad” is so ingrained that we seldom question it. Both forms of economy have their liabilities, and both need careful oversight, but we seem only to focus on limiting socialism without a concomitant balance for capitalism.
As a result, the concentration of wealth has become dramatically uneven in favor of the wealthy. This has been pushed by the GOP’s emphasis on lowering taxes (mainly on the rich) and their recent passing of what they call a tax reform bill which is really a tax cut for the rich. (Witness, for instance, the attempt by Paul Ryan to praise a tax bill which increases the pay of minimum-wage workers by $1.50 per week while failing to point out the $20,000-plus per year increase in the funds available to the top 1%.)
Billionaires like the Koch brothers and the Mercers have received a tremendous windfall from this bill, as have the president and his family. The more socially-conscious billionaire Warren Buffet has complained that the windfall he has received is unwarranted and could better be used elsewhere.
Once again, as it did over a hundred years ago, the federal government owes its citizens more significant oversight and restraint on the power and impact of the super-rich and a redistribution – yes, a redistribution – of wealth to closer match the way it looked at the middle of the last century. This would of course require the passage of real tax reform (as opposed to tax cuts) that accomplishes that goal. With a regressive majority in congress, that is unlikely to change, but a redistribution of who is elected to represent us would allow reform to happen.
Continued in Part 17 - Unions, Social Safety Net
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Return to Part 1 — Prologue
Return to Part 2 — Voting & Election Issues
Return to Part 3 — Gerrymandering & Courts
Return to Part 4 — Congress
Return to Part 5 — President and DOJ
Return to Part 6 — Campaign Financing
Return to Part 7 — Lying and Ethics
Return to Part 8 — Sexism and LGBT
Return to Part 9 — Abortion & Church/State
Return to Part 10 — Guns
Return to Part 11 — Healthcare & VA
Return to Part 12 — Big Pharma
Return to Part 13 — Environment
Return to Part 14 — Energy
Return to Part 15 — Education
Go to Part 18 — Homelessness
Go to Part 19 — Trade, Tariffs
Go to Part 20 — Media
Go to Part 21 — War, National Security
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Above is the sixteenth of numerous submissions wherein I suggest ways our country, our government, and the world can be made better. I am an old fart in my 70’s and have seen much: the turmoil of the 1960’s; Vietnam (where I served as an infantry officer and was awarded a purple heart and other medals); the anti-Vietnam protests (in which I participated while still in uniform); Watergate, the rise of the right wing attack on the poor and powerless during and after the Reagan years; the continued wars in Grenada, Panama, Iraq, Afghanistan and pretty much everywhere else; the Clinton years, the invasion of Iraq in 2002 and the never-ending war since; the brief glow of sunshine during the Obama years; and now Trump. While my dog in this fight is getting long in the tooth, I still deeply care about three things: my country, my country’s honor, and the future we leave to our descendants. My personal history, other than military service, includes college teaching, computer support, hospital IT supervision, consulting, and now — in my retirement — substitute teaching.
I make my recommendations in all seriousness, recognizing that most of them are not immediately attainable. Nevertheless, if we elect people who share our values as our representatives at all levels of government, we can accomplish much.