For two centuries an American Dream of being able to work hard and prosper energized the country and gave the world a vision of a new kind of nation, a Beacon of Freedom. America leadership ended centuries of war within Europe and led to the collapse of the totalitarian Soviet Union. There was even talk that the world had reached the End of History as economic and political modernization led to elected governments, individual rights, and an economic system that benefited everyone.
But then the American Dream faded as it became increasingly difficult for workers to earn a living wage. Millions of adults are not only out of work, but have given up even looking. Work force participation rates are the lowest in a quarter century with more than 7 million jobless men between the ages of 25 and 54, the traditional prime of working life. Millions of others subsist on barely sufficient wages, employed only in low paying and dead end jobs. Technology worsens the problem as more and more tasks are automated and people with low skill levels are increasingly shut out of employment. Economic pressures promote social frictions; people lash out in anger; increasingly desperate individuals turn to drugs and petty crime. Overdose deaths now outnumber traffic deaths, over half a million homeless burden the cities, and youth gangs flourish. America has one of the highest incarceration rates in the world. Militias and hate groups grow as the Ladder of Success disappears. Under these conditions, state and local governments find it very difficult to raise the taxes they need to support operations, police and fire departments, education and parks, not to mention mental health services. These problems are visible globally, all but destroying the vision of an American model.
In good times it is easy to be open and accepting of everyone. But in tough times, it is natural to circle the wagons, to cluster tightly with one's own social group and see others as the problem. It is hard to stand up for basic values if they seem incompatible with personal needs for self and family.
America has all the wealth it needs to address these challenges, but far too much of it is held tightly at the very top levels of society. A couple quick items illustrate this:
- Globally, the holdings of the eight richest people in the world are greater than what half the rest of the planet owns. For America, the richest one percent owns roughly half the country’s wealth. Within the Organisation for Economic Cooperation and Development, American income inequality is on a level with Turkey, Mexico, and Chile.
- After the 2005 recession, the top 1 percent captured 95 percent of income growth from 2009 to 2012 and that trend continues. Now half the jobs in America pay less than $18 an hour.
The core problem is that America has failed to demonstrate that democratic capitalism can lead to a peaceful and prosperous society. And America sets the global standard; democracy is undermined everywhere, clearly in China and Russia as well as in Poland, Hungary, Turkey, Venezuela and dozens of failed or failing states. It would be excessive to say that all billionaires are thieves, but many are. Even for those whose wealth results from significant contributions to society, accumulation can be troublesome. So, for example, $50 billion that Bill Gates extracted from Microsoft could have provided 50,000 employees one million dollars each. The financial system has been modified to extract wealth from society for the benefit of those already wealthy. An ultimate example is High Frequency Trading in which buying and selling at millisecond intervals allows specially equipped traders to skim money off the stock market without any contribution at all to society. A steady rise in the stock market does not reflect a rise in actual value so much as a rise in prices, benefiting those who already have capital. Corporations focus on profits, increasing executive pay to astronomical levels while squeezing workers and ignoring other constituencies, including customers and government. Strong lobbying leads to the best Congress that money can buy. Widespread frustration led to a President who stressed his independence from the establishment but does little to actually reduce the influence of moneyed interests.
All of this is hidden in plain sight. Everyone knows there is excessive wealth accumulation but few people really appreciate its impact on society. This is largely due to smoke screens at both ends that downplay the importance of wealth concentration or provide distractions to keep attention elsewhere.
At the front end, there is every effort to portray wealth accumulation as perfectly normal and to protect those who support it. In a market economy, wealth is certainly acceptable, even desirable. It is what motivates many to perform at their best, to work hard, to innovate and develop new opportunities. Of course everyone tries to gain wealth but now the gains have been excessive – they undermine society. And these excessive gains are protected by a variety of measures, including:
- Limitations on estate tax, tarring it as a “death tax” that resonates strongly with average citizens who naturally want to pass their own assets to their children and heirs. But estate taxes apply on only a very small percent of the population, precisely the percent that has accumulated excessive amounts.
- Similarly high income tax levels for top brackets are denigrated as confiscatory. And indeed they are, and they should be. But “confiscation” has a nasty ring to it, implying that the government is taking away hard earned monies to redistribute, presumably to slackers. In reality, the government is trying to get back monies drained from an increasingly manipulated system.
- Capital gains are taxed at very favorable rates, favorable especially to the rich. It is true that many average Americans also depend on capital gains for retirement income and everyday expenses. But it is relatively easy to provide favorable treatment only up to some threshold.
- Even worse are loopholes, often almost invisible, and also justified by nice-sounding words. President Reagan, for example, promoted “trickle-down” economics, claiming that a reduced tax burden for the wealthy would increase the money available for investment and create more jobs. He was half right – it increased money in the hands of the rich, but not jobs.
- Voting is the central attribute of democracy, but it has been a volatile issue ever since Reconstruction after the Civil War when former Confederate states used a variety of methods to restrict black voting, including poll taxes, literacy tests and simple intimidation. Gerrymandering also has a long history of manipulating election districts to support incumbents. More recently, numerous states have passed rigid identification laws to protect against fraud. Although this sounds perfectly reasonable, there had been minimal evidence of actual fraud, but obtaining the necessary identification documents has been a significant burden for many minorities and courts have restricted these efforts. This has been exacerbated by recent unsubstantiated claims of widespread fraud in the last Presidential election and the formation of an Advisory Commission on Election Integrity has raised concerns on voter suppression. The overall result is increasing difficulty for minorities to vote and strong support for incumbents who consistently protect the wealthy.
At the other end, smoke screens distract attention from wealth accumulation as a basic economic challenge by shifting attention to a variety of other challenges that have high emotional appeal. They are typically presented as underlying causes of current economic distress when in actuality they have minimal impact. This includes:
- Race remains a central element of American politics. It is easy to use it as a distraction, easy to see some one of different ethnic stock as outside one's own group. Inner city turmoil serves as a cover implying minorities are poor citizens, a drain on society. Of course there is some truth to this; minorities do weigh on social programs and certainly have a higher incarceration rate. But the problem is not inherent deficiencies, but economic discrimination that makes earning a good living difficult and feeds anger and frustrations. Wealth and prosperity do not sink down to their level.
- Immigration is also an easy distraction, tied with racism. It is true that America was built by immigrants, but mostly white ones; the early black ones were slaves. The conditions that welcomed millions of immigrants no longer exist – the open West disappeared a century ago and the vibrantly expanding economy that needed a constant supply of new workers and provided a Ladder of Success for them is also gone. The Melting Pot always operated slowly; immigrants frequently took a generation or two to assimilate into American culture. Now it is much more difficult and a significant percent of immigrants do not even want to assimilate into some American culture. Rather then looking to enrich American culture with new perspective, they look to maintain their own cultures as islands within America rather than elements assimilating into America. Yet immigrants still contribute significantly to the American economy. Many jobs, especially in agriculture and construction, depend on immigrants because the wages are too low to attract Americans. This also hearkens back to wealth at the top rather than wages at the bottom. And it has an associated problem that much of the illegal immigration is due to American failure to promote competent governments in Central America and to work with Mexico on addressing the American drug scourge. America cannot prosper if its neighbors are in turmoil.
- National security stresses terrorism as a global threat, requiring expenditure of many billions of dollars and ignoring Eisenhower's warning that “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed.” Terrorism, perhaps capable of causing a hundred deaths a year, is not a threat but a nuisance. A hundred people a DAY are killed by drug overdoses. In the Cold War, the Soviet Union could have caused a hundred MILLION deaths; that was a threat. Terrorism is not.
- Even though religion generally renounces wealth, religious themes can protect it as they have strong emotional appeal. It is a major force in the lives of many people, especially in times of trouble. People enraged over sex, gender, abortion, marriage or birth control have little time to address other issues. Many white supremacists use a totally bogus Christian veneer to cover their racist demands. Jesus certainly wasn't white. He was of Middle Eastern ethnic stock. Exactly what he was, we don't know. But we know what he wasn't - Caucasian. And he expressed strong support for other ethnic groups as exemplified by the parable of the Good Samaritan. Religion teaches us to watch out for our fellow humans, but hard times make this difficult for many.
Overall, senior politicians and their moneyed backers are perfectly satisfied to promote public outrage on these issues. Political discussions are widely covered, especially emotional ones. But the central issue of wealth distribution is barely visible, covered over by the smoke of wealth acceptance and of distractions that focus attention on peripheral issues. America badly needs to return to the values stated in its founding documents, values that supported its global leadership role. But until the central issue of wealth distribution is addressed, American society will continue to be fractured and combative. E pluribus unum, a single society uniting all, is only possible when everyone is doing well, when we can all embrace our neighbors without undermining our own families. Unity is what can make America great again.