The Forbes 400 Shows Why Our Nation Is Falling Apart

It's great to know that during the worst economic crisis since the Great Depression, the wealth of the 400 richest Americans, according to Forbes, actually increased by $30 billion. Well golly, that's only a 2 percent increase, much less than the double digit returns the wealthy had grown accustomed to. But a 2 percent increase is a whole lot more than losing 40 percent of your 401k. And $30 billion is enough to provide 500,000 school teacher jobs at $60k per year.

Collectively, those 400 have $1.57 trillion in wealth. It's hard to get your mind around a number like that. The way I do it is to imagine that we were still living during the great radical Eisenhower era of the 1950s when marginal income tax rates hit 91 percent. Taxes were high back in the 1950s because people understood that constraining wild extremes of wealth would make our country stronger and prevent another depression. (Well, what did those old fogies know?)

Had we kept those high progressive taxes in place, instead of removing them, especially during the Reagan era, the Forbes 400 might each be worth "only" $100 million instead of $3.9 billion each. So let's imagine that the rest of their wealth, about $1.53 trillion, were available for the public good.

What does $1.53 trillion buy?

It's more than enough to insure the uninsured for the next twenty years or more.

It's more than enough to create a Manhattan Project to solve global warming by developing renewable energy and a green, sustainable manufacturing sector.

And here's my favorite: It's more than enough to endow every public college and university in the country so that all of our children could gain access to higher education for free, forever!

Instead, we embarked on a grand experiment to see what would happen if we deregulated finance and changed the tax code so that millionaires could turn into billionaires. And even after that experiment failed in the most spectacular way, our system seems trapped into staying on the same deregulated path.

Instead of free higher education, health care and a sustainable economy, we got a fantasy finance boom and bust on Wall Street which crashed the real economy. We have our 400 billionaires, and we have 29 million unemployed and underemployed Americans. We have an infrastructure in shambles. We have an environment in crisis. We have a health care system that would make Rube Goldberg proud. And we have the worst income distribution since 1929.

I hazard to guess that each and every Forbes 400 member could get by with a net worth of $100 million. I don't think that would kill their entrepreneurial drive or harm our economy--in fact it would be a major boon to the economy to step back from the edge of such massive concentration of wealth. The real problem is getting there form here. A wealth tax that kicks in when you become worth more than $100 million would be a good start. The Eisenhower tax rate on adjustable gross income over $3 million a year would help as well.

And please let's not call it socialism, now that we've placed the entire financial sector on welfare to the tune of over $13 trillion in subsidies and guarantees. (By the way, the yearly budget outlays for means tested programs for low income citizens is about $350 billion per year. So Wall Street's welfare is about 37 times as large as welfare for poor.)

So if narrowing the income/wealth gap isn't socialism, what is it? It's the America that thrived in the 1950s and 1960s. It's the America that created a middle-class and vowed never to let the financial gamblers return us to another depression. It's an America that put its people to work and built an infrastructure that was the envy of the world.

Where's Dwight David Eisenhower when we need him?

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.

 

 

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Comments

[IntellectuallyHonest]

Or imagine what we could have done with the $2 trillion we spent on the war in Iraq. There would probably be no depression.

[lisakaz2]

Thanks for your piece. It shows the warped values in this country and will doom this country and it's ego-driven view of itself that these ppl hold. They will bring this country down and will blame someone else for it because they are not responsible for anything. Bushie values at their, ahem, "best."

[lff]

I don't necessarily disagree but where is the evidence - or even the rationale - for believing that without the possibility of keeping that trillion and a half dollars those people would have made it in the first place? Isn't it just possible that you only get trillion dollar results with trillion dollar incentives?

lff

[Lendall]

What drives capitalism is POUM - "the possibilit­y/probabil­ity of upward mobility." This goes back to Friedrich Engels and also the "Economic and Philosophical Manuscripts of 1844," and is related to what is known as "false consciousness." My point: People are fascinated by the hyper-rich, whether it's Bill Gates, Oprah or Madonna. And they are equally fascinating by the old dude revving his Lamborghini at the intersection as they lope along in their Honda Civics. The numbers in the article and in the comments are all fascinating, but nothing is going to change this.

EXCEPT that perhaps now, for the first time since the Great Depression, there is no POUM. The Baby Boomers, their savings wiped out, are facing not only the possibility, but the inevitability of DOWNward mobility. Younger people are facing lifestyles several notches below their parents'. The single family home and college education for the kids will no longer be the middle class (and, indeed, working class) American dream.

Of course it was POUM that made people live beyond their means. And it was POUM (ultimately) that made those 400 dudes hyper-rich. The question is: What do the "redistribute the wealth" bloggers want? A 50% tax rate (PLUS social taxes) for people who make over 150,000 pounds per year? And where would that money go? To create more of those curiously invisible Obamajobs?

[Axlotl]

Maybe it is for stupid people and liberal arts majors, but I don't find it "hard to get your mind around a number like that" at all

1.57 trillion dollars is $1570000000000 controlled by 400 people. If you seized their assets and distributed them evenly amongst the american populace, that would be $5233.33 back int the pocket of every man, woman, and child in the USA.

If you cashed that sum into dollar bills (which would probably require every tree on Earth...) and laid them end-to-endit would stretch 148.7 *million miles*. That's from the Earth to the sun and halfway back, or it could wrap around the earth roughly 6000 times. (imagine a band of dollar bills that circles the globe, 1000' wide.

Converted to dollar bills, their money would weigh 1.57 billion killograms, which is approximately 1000 American battleships, or 150 honda Accords. (Each dollar bill weight 1 gram. Now, imagine their assets in cash, stacked on a giant scale with 150 honda accords parked in the *parking lot sized scale* on the other side.

Basically it's enough to take everyone in America out out to a decent lunch, every day, for a year...buy them 2500 gallons of gasoline...buy you 100 new pairs of shoes...or simply donate it to a political party and basically BUY our democracy.

Any questions?

Any questions?

[Canthisbe]

Questions, questions???:

Interesting visualization trivia - but still just trivia.

I’d be more interesting in hearing where you get your gas for $2.0933 a gallon?

$14.38 for a decent lunch - OK.

$52.33 for a new pair of shoes? Maybe - might have to hit the sales and throw in some off brand gym shoes.

Does a Honda Accord really weigh as much as 6.66 American battleships?

Answers.com:

This is a very general question with more than one answer. There has been many different battleships in the U.S. and they all have different weights. The most recent and "modernized" battleship would be the USS Missouri which weighed 58,000 tons with a full load and 45,000 tons unloaded while it was still in commission.

http://wiki.answers.com/Q/How_heavy_is_a_us_battleship

Let’s go with the empty weight - 45,000 X 6.6 = 299,700 tons. That seems heavy for a Honda Accord, but I am more impressed than ever with the gas mileage they get.

If you donated 1.57 trillion to a political party, which one would you give it to?

If a political party got that much, wouldn’t they have enough to do whatever they wanted and they wouldn’t need to pay any more attention to “democracy”?

Or, alternatively, what makes you think the bastards would stay bought once they got the money?

What’s the point of your analysis?

Final question: Are you a stupid person or a liberal arts major?

[Roy Heath]

Does anyone find it odd that we spend most of our lives making them rich when the 'creator' has another purpose for us? Doesn't anyone see that freedom and liberty are marketing tools to keep you working toward nothing? Doesn't anyone question this system? Money is not the root of evil but our behavior in the pursuit of it tends to lean heavily toward shameful.

Call me a hippie, socialist, commie or whatever, but I think being a wild animal would give me more so called freedom and liberty than working my life away for superficial, inter-changeable and infuriatingly obsolescent material things. Having to protect it because the time and effort we put into it, kissing the ass of the wealth makers, would be lost if we didn't (or at least that's what is advertised to us). Meanwhile,we maintain this process, not realizing that we are killing ourselves and others so that someone can have extra paper in their, if not our own, pockets. So we can maintain our (false) 'sense' humanity, not conscious of the lost time for an inanimate object to please us when we have each other. I think what we have done, do and participate in is disgusting. It's suicide.

My point, it's time to solve our problems without money. We don't need it. The need is a lie to keep you in the system. It's a lie. The game was created by them and will be maintained by your belief in it.

[suzc]

Money is not the root of all evil. LOVE of money is the root of all evil.
It has taken down the United States of America. See article, above.
Enough is clearly never enough for the top 3% of the country.
Sadly, there are only so many mansions and yachts and shoes they can buy.
Leaving the economy in a shambles because the majority have no discretionary income these days.

But to say we don't need money is idiotic.
We need a form of trade. It is not possible to feed, shelter, transport, or buy health care for yourself or anyone else without money. You are not personally able to provide for your basic needs alone.

Perhaps what we need is a cash system instead of all this credit for all these trillionaires, both individual and corporate.

[Name Not In Use]

This is an important narrative.

Now what?

Helping people understand what these numbers mean is essential to understanding the enormity of the ongoing economic terrorism.
Do people know that the "bailout" of AIG alone cost more than the entire program to land a man on the moon in the 60's even allowing for inflation?
Was it worth it?
How many of the economic terrorists are on trial or behind bars?
Is the game still being played with no changes to the rules?
The discontinuity is near.
It has to be.

[ThoughtShaman]

Very nice - "Economic Terrorism." I'm going to start using that from now on.

[suzc]

me too

[FloresdelaHoz]

This country is going to change dramatically in the next ten years. We can't ignore that the top 1% of Americans owns 32% of all financial assets in this country. This is more than in any LatAm country including Brazil. We can't ignore that the top 1% were bailed out by Bush - Obama who gave away US$13 trillion in guarantees to financial institutions while US$1 trillion over 10 years for public health care option is stopped dead on its track by the top 1% who control the media and the health care industry.

The upper middle class is screwed daily in this country. They get taxed at the top federal marginal tax rate of 35% (44% including state income tax in California or NY) while the wealthy receive dividends and capital gains that are taxed at 15%. So if one make $500K a year, one pays more taxes (effective tax rate) than someone who receives $10M in dividends a year. The poor and middle class get even more screwed since they are indentured servants whose children do all the fighting and dying for the American empire.

The problem with changing our current crony capitalist system to are more efficient and morally honest German or Nordic model is that the media is controlled by the top 1%.

[csavage]

Ummmmm....
Your state taxes are tax deductible from your federal taxes, unless you live in a state like me that has no state tax and the IRS lets you deduct your sales taxes
When I do my turbo tax yearly-I get summary of my income tax bracket. The average wage for my bracket is $556K a year and that average tax paid is less than 15% of income, figuring in deductions.
My tax bracket is the second to the highest at 32%. I pay about 17% of my income in taxes, after deductions. The higher the income, the less paid in terms of percentage of income. That disparity doesn't start at $500K, it's starts lower than that-around $250K.
What the average middle class Repub doesn't understand is, yes, the top 20% of income pays 80% of taxes, but the top 1% pays less, as a percentage of income, than the person at the 80-95% level

[garroz]

Let's confiscate all their wealth. That will teach those bastards. It worked great in Cuba and Russia

[neesy08]

I agree wholeheartedly with you. Let's go back to taxing the top people more. I say around 60%, and close all loopholes.

[confused17]

Mr. Leopold,

I think you need to check your facts. The number you cite - $30B - is the increase from 2007 to 2008. That is the info from a year ago, BEFORE the "worst economic crisis since the Great Depression." In the past year, the 400 actually LOST about 10x that amount (showing that even the super rich are not immune from this steep economic downturn). In 2008, someone needed approx. $1.3B in assets to be included. This year, $900M.

I'm not here to defend the super rich. I am one of the first people to argue for a narrowing of the wealth gap. But, while your statements about the 400 are technically "facts," they are facts that are a year old and do not fit the premise of your argument that these 400 people increased their wealth, while "the little people" lost their 401ks and became unemployed.....in the past year.

I will probably have to turn in my "bleeding heart membership" after posting this, but I'm disappointed that you, who publishes books on financial/economic subjects, would write an article about a current issue using year-old statistics. And, it really disturbs me that Huffington Post accepted it as truth without checking the main premise. As for the commenters, please fact-check for yourself. It's easy in this day of quick research on these crazy interwebs.

[Les Leopold - Huffpost Blogger]

Dear Confused17. As I learned today, you are correct. I had picked up the article from a reputable source that printed it as if it were current news. I didn't check the date. My own fact checkers also missed it. Don't blame Huffington. It's up to me to be sure my facts are correct and current. Therefore my first paragraph should show that the total wealth was about 1.27 billion, a drop of 300 billion -- 19.1%. However, the rest of the piece still stands. We have let the distribution of wealth/income get completely out of hand. It is dangerous for our society and for our economy. Thanks for your comment.

[TuoulumneFlower]

Doesn't change the fact that these folks did have a $30 Billion-with-a-B increase in wealth in one year, while the rest of us were poised to get flushed right down the toilet.

[dartagnan]

"Where's Dwight David Eisenhower when we need him?"

He's buried in Abilene, KS. But if he were alive today I'm pretty sure he would NOT be a Republican.

[FunPie]

Explain to me how no one can afford to hire new workers right now? I can name 400 people who can, but part of their wealth probably came from laying off the people at the bottom, lest they only enjoy a 1% increase in profits.

http://thefunpie.wordpress.com

[CaptD]

"Greed is Out", and if these top 1% are not very careful they will not get to enjoy their money...

The problem with being super rich is that others get jealous when they and their family are hungry!

[KingKrub]

Very nice, berkamore... blanket a generation... i, like my family am a life long dem, actually a socialist liberal, like the rest of my family. My father was a carpenter who if he made $15 grand a year, it was a good year. We were taught to never live above our means and never have. Oh, and by the way, i've NEVER voted for a republican... we could see through all of that "trickle down" crap.

The word is greed... it's a human trait that can be held in check. All depends on how you were raised.