The Very Serious People in Washington are busy trying to find creative ways to cut Social Security and Medicare and take other benefits from middle-class and moderate-income families. The refrain here is that we just can't afford this level of generosity any more.
There are two parts of this story that should drive the rest of us crazy. And it is difficult to determine which one is the more infuriating.
The first is that we know that many people in this country are fabulously rich. And as Elizabeth Warren beautifully reminded us, none of them did it on their own. But Professor Warren is actually far too generous in her account.
While some number of the wealthy may have succeeded by working hard and being smart or creative, many of the very wealthy got their money directly or indirectly through the big hand of the government tilting the playing field in their direction. Their hard work involved rigging the rules to ensure that they ended up on top.
Nowhere is this better seen than on Wall Street, which is chock full of multimillionaires and billionaires who got to the top by taking advantage of items like "too big to fail insurance" for their banks, gambling with government insured deposits, ripping off state and local governments on pension management fees and, of course, the trillion dollars in bailouts bucks given at interest rates that were way below market levels. These people know the role of government very well, even if they pretend this is all about a free market.
But the banks are not the only ones that rig the rules. The drug companies profit enormously from government-granted patent monopolies. Drugs are generally cheap, that is why it is possible to buy hundreds of generic drugs for $5 or $6 per prescription at chain drug stores. Drug companies are able to charge hundreds or even thousands of dollars for prescriptions because they have patent protection. As a result we spend close to $300 billion (at $1,000 per person) a year for drugs that would cost around $30 billion a year in a free market.
The government rigs the deck for the rich and powerful in other ways as well. Under the current enforcement pattern in labor law, the government comes down like a ton of bricks on any union that breaks the rules - for example by having an unlawful strike. By contrast, companies get away with a slap of the risk for even the most flagrant violations of labor law.
Our trade policy was designed to put downward pressure on wages for the bulk of the country's workforce by putting them in direct competition with low-paid workers in the developing world. This effect is exacerbated by the over-valued dollar. Meanwhile, those in relatively privileged professions, like doctors and lawyers, remain largely protected from international competition.
The list of ways in which the wealthy have structured the rules to ensure that they stay rich and get richer is lengthy. But the fact that the Very Serious People are looking to cut Social Security for the elderly and Medicaid for the unemployed at a time when Countrywide's Angelo Mozilo and Citigroup's Robert Rubin are still immensely rich is only the first reason that the public should be furious at those in power.
The second is the cause of the current downturn. The reason that we have 26 million people unemployed, underemployed or out of the work force altogether is not that we are poor, but rather that we are rich. The immediate problem facing our economy is not one of too few goods and resources; it is a problem of too little demand. And this is what should make the Wall Street Occupiers and everyone else absolutely furious at our leaders.
If people had more money in their pockets, then they would buy more goods and services. Companies would then hire more people to produce these goods and services and we would then have more jobs. The unemployment and poverty that the country is experiencing today is overwhelmingly the result of a failure of political will.
If the federal government increased spending on infrastructure, gave teens jobs cleaning up their neighborhoods, gave state and local governments the funds to keep teachers and firefighters employed and encouraged employers to shorten work hours rather than lay off workers, we could quickly get the economy back to full employment. Economists have known this story for more than 70 years, but somehow creating jobs doesn't rank as high on the priority list in Washington as cutting Social Security and Medicare.
In short, we have an economic system that, even when it is working, has been rigged to redistribute income to the rich. And we have a political system that at a time of immense economic distress is more focused on undercutting the means of support for working families than fixing the economy. It is hard to understand why everyone is not occupying Wall Street.
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David A. Love: Why Conservatives Need to Support the #OccupyWallSt Movement
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IT ERODES THE MAJORITY OF OUR FREEDOMS.
JUST AS IMPORTANTLY, IT MAKES A MOCKERY OF THE US CONSTITUtTION.
IF THE US CONSTITUTION IS SOCIALISTIC,
SO BE IT !
Author of “The Triumph of Politics: Why the Reagan Revolution Failed”
"We had a 30 year spree of phoney prosperity in this country."
"In 1985, the top five percent of the households – the wealthiest five percent – had net worth of $8 trillion – which is a lot. Today, serial bubble after serial bubble, the top five per cent have net worth of $40 trillion."
"A one time 15% wealth tax would cut the deficit in HALF !"
IT"S TIME THIS WRONG IS RIGHTED BY BRINGING BACK THE 90% TAX RATES.
Without the middle class the US is in definite decline, thanks in part to Citizens United SCOTUS ruling, making a mockery of the US Constitution thru the Kochs', Wall Street, MIC, etc.
The nation's debt went into the pockets of the few and towards their tax cuts while the tremendous costs are now coming home to roost.
a) 80% of millionaires are self made, with a bulk of them being either small business owners of high-skill professionals, doctors, lawyers, etc, many of them were late into their careers, 50yo and above. There was no rigging of the rules for them. More importantly, economic mobility down is just as alive and well as it is up, with 57% of those in the top 1% dropping to a lower bracket between 2000 and 2007, which is equivalent to the percentage of people that worked their way out of the bottom quintile. There is no static top 1% that is milking the system and manipulating it despite what progressive paranoia and propaganda is trying to ‘fabricate’. I agree with you, though, that we should limit the cartelization of these industries and open medicine, law, education to the same market forces that products have, please push to have Wal-Mart provide legal, medical, and banking services.
b) Your calls for more Keynesian political payola to supporters and special interests is ill-received. Keynesianism has never worked, not during the 30’s, not during the 40’s, not now….never! It is a failure whose sole popularity rest on the fact that politicians like the idea that you can give away money and somehow that will have a lasting positive effect on the economy. It doesn’t. Quite the opposite.
c) Research shows that fiscal consolidation and austerity is better than tax increases for correcting a debt-laden economy.
Kai
b) Pumping money into the economy to rebuild our crumbling infrastructure, while not super long-term job creation, is NOT "giving money away"
c) Research says exactly the opposite; you are terribly misinformed or getting your talking points from the Tea Party
b) Yes it is. It is a transfer from one group of individuals to another. If you want to more infrastructure, privatize it, it will transfer the cost of building, using, and maintaining infrastructure form the beleaguered taxpayer, to those who actually use it. Why pay for a high-speed train system in California if I live in Colorado? Why not let those who ride on that system pay for through tickets and let individuals take a chance that it will be profitable by building it. It it will not, then let’s not build it.
ECB: ‘The study finds that ambitious expenditure retrenchment and reform coincides with large improvements in fiscal and economic growth indicators.’
http://www.ecb.int/pub/pdf/scpwps/ecbwp634.pdf
And Goldman:
http://www2.goldmansachs.com/ideas/global-economic-outlook/limiting-the-fallout-doc.pdf
Sweden:
http://www.economonitor.com/dolanecon/2011/07/31/how-smart-fiscal-rules-keep-swedens-budget-in-balance/
Canada:
http://mercatus.org/sites/default/files/publication/Canada's%20Reversed%20Budget.Henderson.5.5.11.pdf
IMF: ‘Given the high levels to which taxes have risen and the danger of stifling growth by raising taxes further, to say nothing of the political consequences of trying to do so, it is reasonable to suppose that reducing government spending offers the best means, if not the only means, of eliminating these fiscal imbalances.’
http://www.imf.org/external/pubs/ft/issues4/index.htm
Research Paper: ‘Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases.
http://www.economics.harvard.edu/faculty/alesina/files/Large%25252Bchanges%25252Bin%25252Bfiscal%25252Bpolicy_October_2009.pdf
Research paper: ‘We find that deficit-financed tax cuts work best among these three scenarios to improve GDP.
http://onlinelibrary.wiley.com/doi/10.1002/jae.1079/abstract
Kai
They didn't make themselves millionaires in a VACUUM ! Just because they were fortunate enough to be successful, doesn't mean they were the ONLY WERE RESPONSIBLE FOR THEIR SUCCESS.
WE ALL PAID FOR THEIR SUCCESS.
You did not pay for their success; you paid for your right to compete on the same infrastructure and in the same markets with access to the same resources as they did to get your own success. If you have failed that does not automatically entitle you to a share of their success.
More importantly, they pay more for the infrastructure and public goods and services they use, and the poor have to travel to the welfare office on the roads that they financed, pick up their unemployment check at the unemployment office and workers they paid for, cash in their food stamps at a store that uses the power grid they unequally support. So the poor should hand over a greater part of their welfare checks, unemployment check and food stamps to the rich, right? I mean by your logic, the rich deserve it since the poor are benefiting from common goods and services they paid for.
WE ALL PAID FOR THE BENEFITS OF FAILURE GIVEN TO THE POOR AND THEY OWE US.
I demand they cut us a check today.
We need to repeal the Bush Tax Cuts for the Poor at the lower two quintiles and start making them pay their fair share for the public goods and services they use, right? That is what you are about, common contribution and shared payment for people unfairly leeching of the society? Great, the poor need to ante up.
Kai
I would restate one of your sentences to real like this:
‘The first is that we know that many people in this country are fabulously POOR, SINCE POST-TAX-TRANFER POVERTY IN THE UNITED STATES IS NOT ALL THAT BAD COMPARED TO OTHER COUNTRIES, EVEN THOSE IN EUROPE. And as Elizabeth Warren beautifully reminded us, none of the POOR GO TO THE WELFARE OFFICE OR UNEMPLOYEMNT OFFICE TO LEECH OF THE TAXPAYER on their own.’
Thanks for pointing out, as Ms. Warren pointed out, that the social contract, as represented by federally-provided common goods and services, works both ways and that the poor are taking more than they are giving and that the rich are giving more than they are taking. More importantly, it is good to note that the poor built our roads…which the rich paid for…and have a bigger debt to the rich than the rich do to the poor.
If you want to interpret ‘social contract’ to mean ‘take from others who have worked for it’ then, by all means, it is time for the poor to start paying their fair share. Let’s rescind the Bush Tax Cuts for the Poor at the lower quintiles, while preserving the well-deserved tax cuts for the higher quintiles, and stop these people from freeloading and ribbing others of the American Dream.
Kai
Add to the above the Byzantine complexity of our Federal and State income tax. On the face of it we have a 35% corporate rate--the highest in the known world. In actuality anyone with a top-drawer accountant and Washington access can take advantage of loopholes. The whole system needs to be overhauled to become fairer, flatter and far more simple.
Our family is doing nothing different now than twenty years ago, but our federal income tax return increased from eight to twenty pages and our state return from two to six. I know this because I just found my 1991 return, and a bright light suddenly came on.
Do we need to tax the truly wealthy, and I don't mean those only making $250K? Of course, but we also need to purge our state and federal codes of laws and regulations which have been overtaken by time or technology, were enacted to serve a small targeted constituency, are costing more than they take in or are basically unenforcable.
I hear this a lot - particularly from the right, bnbut no one ever gives any specifics or examples of what those regulations might be
There are over 300 "special state boards" that deal with everything from water rights to medical pot dispenseries. The vast majority of board members are former state or local politicians.
If you don't hear asny specifics it is because you are not listening.
Obviously, plutocracy (and this is what is referred to in the article) is unacceptable. The separation of state and business must occur. It will be as messy and upsetting (similar to separation of state and religion?).
When I served as a soldier the apathy of the general public has always angered and annoyed me. I stood for the physical defence of democracy while others let it slip into the hands of big business. To make change occur I can only recommend becoming actively involved in the political fray; it is not necessary to join a political party. Speak out on the issues that resonate with you.
The real meaning of OWS to me is the separation of State and business. The opportunity for my kids to have a real future of their choice (run their own small business, become a doctor or tradesperson?) is important. I perceive that it will be impossible for them to enjoy real opportunity unless the plutocracy is removed.
Very well said. That's exactly what is at stake right now.
Government should never be so credulous as to assume business will do the charitable thing because that has never been, nor is it supposed to be, its mandate. Government regulates. Business conforms to regulation. When regulation becomes too onerous, as in the former Soviet Union, the economy fails under its weight.
The trick is in enacting smart regulation which discourages most of the abuses without also discouraging growth and productivity.
One of the best examples of the latter is our current minimum wage. How many young people ages 18-21 would be out of work today if we had enacted a student minimum wage? No one in their right mind is going to pay $7 per hour to an immature kid with no experience.
when the top 1% capture 25% of national income, it's a form of "forced" savings, and it depends on how it's used. If it's used for a national purpose, like building railroads, energy investments, or other productive investments, it may be acceptable. But, it's mainly horded.
However, since the other 99%, of the population, reduce their spending (because more is captured by the top 1%), the part economy that "serves" the 99% must shrink (share of the pie shrinks), and the part of the economy that "serves" the top 1%, doesn't grow enough to make up for the loss (by shrinking the 99%'s share of pie), capacity utilization (employment) will shrink.
Eventually (probably a decade or two), the economy will adjust to serve the top 1%. The rest of us will just have to get used to "live within our means"; i.e. forget health-care, college, and Social Security; we can't afford it because the rich demands a larger share of the pie.
Fortunately, it's a political choice whether we want an economy that serves mainly the top 1% or an economy that serves everybody.
A simple example - an investor buys a stock because he or she thinks -- right or wrong -- that the company is going to grow the investment. But you are saying Mr. 99% is always foolishing giving up money to Mr. top 1% if he buys stock.
This is great debate -- whether capitalism is simply a means for the wealthy to rip off the poor or whether it increases the wealth pool. Before we deamonize all big business, I think it is prudent to separate those that are actually creating stuff from those that are simply moving money around from one pocket to another. McDonalds actually makes a hamburger, Apple actually makes an Iphone, Netflix actually delivers streamed content, all of which I happen to like.
Most people that have a little discretionary income are looking for someone or something that can create wealth, not just move it around into some fat cats's pocket.
http://sociology.ucsc.edu/whorulesamerica/power/we...
This is a capsule summary of the results of 30 years of "trickle-down" economics. As billionaire investor Warren Buffett said a few years ago, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
It's long past time for people to get upset about what's happening. I salute all of those in the streets making their voices heard and hope we can all help transform that energy into results at the polls next year and eventually into a dramatic change in the system.