The
Great Wealth Robbery
By Richard Eskow
February 16, 2013 "Information Clearing House" - Two important events took place this week. One was President Obama’s call for a higher minimum wage, which got a lot of attention. The other was a new report which showed just how much of our nation’s wealth continues to be hijacked by the wealthiest among us.
By Richard Eskow
February 16, 2013 "Information Clearing House" - Two important events took place this week. One was President Obama’s call for a higher minimum wage, which got a lot of attention. The other was a new report which showed just how much of our nation’s wealth continues to be hijacked by the wealthiest among us.
That didn’t get
much attention.
There’s a Great Robbery underway, although most of its
perpetrators don’t see themselves as robbers. Instead
they’re sustained by delusions that protect them from facing
the consequences of their own actions.
Heads I Win …
An
updated
report from economist Emmanuel Saez details the loss of
income suffered by 99 percent of Americans, and the parallel
gains made by the wealthiest among us. Its most startling
finding may be this: The top 1 percent has captured 121
percent of the increases in income since the worst of the
financial crisis, while the rest of the country has
continued to fall behind.
If you
thought the rich recovered from the crisis just fine but
everybody else got the short end of the stick, relax: You’re
not crazy. And since the financial crisis was caused by
members of the 1 percent – not all of them, of course, just
the ones we spent so much to rescue – it’s understandable if
the injustice still rankles you.
You
rescued them. Now they’re
drinking your milkshake.
Tails You Lose
But
this wealth shift is not a new phenomenon. As Saez notes in
his paper, “After decades of stability … the top decile
share has increased dramatically over the last twenty-five
years.” In fact, the top 10 percent’s share of our national
income is higher than it’s been since 1917 - and
maybe longer. (The figures don’t go back any farther than
that.)
Although it began during the Reagan years, to a certain
extent this wealth shift has been a bipartisan phenomenon.
During the Clinton boom years (more of a bubble, actually;
Dean Baker has the details) the top 1 percent saw their
real income grow by 98.7 percent, while the other 99 saw a
smaller increase of 20.3 percent. They lost more during the
recession that followed – a little over 30 percent, as
opposed to 6.5 percent for everyone else – but more than
made up the difference again during the Bush years.
The
same thing happened during the Great Recession: The top 1
percent lost more during the initial shock, but they’re
rapidly making up the difference now. Government policy’s
been designed to help them. (Meanwhile, underwater
homeowners still don’t have the help they need.)
The
disparities are even greater when you include capital gains.
(Saez uses pre-tax income for his figures. Given the
generous tax breaks for capital gains and the many loopholes
used by the wealthy,the after-tax differences could be even
greater.) There’s even economic injustice at the top. Gains
for the one percent have far outstripped those of the top
five and top ten percent.
As the
old song says: Them that has, gets.
If you can remember
the sixties you weren’t there … or can’t afford to
remember
The
minimum wage has been falling since 1968. As John Schmitt
notes in his paper, “The
Minimum Wage Is Too Damn Low,” “By all of the most
commonly used benchmarks – inflation, average wages, and
productivity – the minimum wage is now far below its
historical level.”
It’s
currently $7.25. What would it have been if it had been tied
to a commonly-used benchmark? Schmitt ran the numbers:
Consumer Price Index (CPI-I):
$10.52
Current CPI methodology (CPI-U-RS):
$9.22
As a percentage of average production
worker’s earnings: $10.01
And if
it had been tied to productivity gains the minimum wage
would be $21.72 today. But that cream was skimmed off at the
top.
Magical Thinking
There’s a myth in this country that enormous wealth doesn’t
come from anywhere or anyone, that it’s self-creating and
self-sustaining, thriving on pure oxygen like an epiphyte or
a garden fairy. In reality, highly concentrated wealth is
caused by actions – human actions with human consequences.
Saez:
“A number of factors may help explain this increase in
inequality, not only underlying technological changes but
also the retreat of institutions developed during the New
Deal and World War II – such as progressive tax policies,
powerful unions, corporate provision of health and
retirement benefits, and changing social norms regarding pay
inequality.”
Wealth
inequity is created whenever an employer lowers his
employees’ wages, replaces a full-time worker with several
part-timers, busts a union, cuts corners on workplace
safety, or pays a lobbyist to change the rules.
It’s
created whenever a job is shipped overseas, and when
investments are shifted from job-producing industries to the
non-productive financial sector. It’s created when GE
outsources its manufacturing operation and gets into the
banking (read, “gambling with taxpayers’ money”) business.
Or when AIG stops insuring risk and starts betting on it.
And
the process isn’t slowing down. In fact, it seems to be
accelerating.
As
Saez says, “We need to decide as a society whether this
increase in income inequality is efficient and acceptable
and, if not, what mix of institutional and tax reforms
should be developed to counter it.”
Up
President Obama’s proposal is modest, and there’s no reason
not to enact it immediately. For those who believe that
businesses “can’t afford” to pay higher wages, some key
facts:
Most low-wage workers
work for large corporations, not Mom-and-Pop businesses.
A Data
Brief from the National Employment Law Project finds
that 66 percent of low-wage employees work for companies
with more than 100 employees. A handful of very large
corporations collectively employ nearly 8 million low-wage
employees.
There’s no evidence
minimum wage increases mean fewer jobs.
Opponents say a higher minimum wage means fewer jobs. But
the official U.S. unemployment rate in 1968, when the real
minimum wage was highest, was 3.6 percent. Today it’s 7.8
percent – and the unofficial numbers are even worse. At the
state level, the Fiscal
Policy Institute recently concluded that “states with
minimum wages above the federal level have had faster small
business and retail job growth.”
Ninety-two percent of
the 50 largest low‐wage employers in the country were
profitable last year.
As the
NELP notes, big corporations more than recovered from the
recession: 75 percent are collecting more revenue, 63
percent are earning higher profits, and 73 percent have
higher cash holdings than they did before the crisis.
Bringing It All Back
Home
The real “job creators” aren’t the ultra-wealthy. If they
could create jobs with all their added wealth, they would
have done it already. The real job
creators are working people with jobs.
They
don’t invest their money in hedge funds or stash it in
offshore accounts. They spend it: on food,
transportation, their kids’ education, maybe a night at the
movies … And then other people get jobs making those things
possible.
We
have a working model to follow: The USA in the 35 years
after World War II. As Paul Krugman says, “To the extent
that people say the economics is confusing or uncertain,
that’s overwhelmingly because people want it to be.” We know
how to do this.
Raising the minimum wage is a start. A maximum wage
would help, too, by reducing CEOs’ incentives to emphasize
quarterly gains over long-term growth and leaving more to be
shared with employees.
We
also need a national strategy for regaining the more
reasonable distribution of income this country had in the
1950s. We need to ensure that the door of opportunity, which
is closing every day for millions of young people, is opened
again. And we need to ask the wealthiest to really pay their
fair share – at something closer to the top tax rates of the
1950’s or 1960’s. (Elvis Presley’s manager “Colonel” Tom
Parker once said “I consider it my patriotic duty to keep
Elvis in the ninety percent tax bracket.”)
Most
of all, we need to educate those around us so they
understand what’s happening. That includes the
well-intentioned well-to-do, who might do more to end the
problem if they knew it existed. After all, you can’t stop
a robbery until you know it’s happening.
This article was originally posted at
Campaign for America's Future
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