Thursday, May 5, 2011

Injustice in America

Wealth disparity in America disturbs me more than religious wrongdoing. I’m particularly upset that our public air waves are drenched in rhetoric from the right, the tax-cutting extremists who blast social programs that make life tolerable for some of the poor.
Facts I wish our media would broadcast:

• Incomes in the U.S. are less equal than in Guyana, Nicaragua, and Venezuela. We have roughly the same inequality as Uruguay, Argentina, and Ecuador. Latin American incomes are actually equalizing, but inequality continues to increase in the United States.

• Our income tax code essentially ignores top incomes—those making hundreds of millions, even a billion dollars a year! These billionaires are taxed at the same low rate—35%—as those making $373,650 a year, less than half a million! Our tax code fails to distinguish between them. Insane!

• The richest 1 percent owns 34 percent of our nation’s wealth—that’s more than the entire bottom 90 percent, who own just 29 percent of the country’s wealth. The top one-hundredth of 1 percent makes an average of $27 million per household per year, while the average income for the bottom 90 percent of Americans is $31,244.

• Despite an economy that's twice as large as it was thirty years ago, the bottom 90 percent —if they’re employed—gained less than 1 percent over more than a third of a century, earning on average only about $280 more a year than thirty years ago, adjusted for inflation.

• Two-earner families fare better, but, today, single parents with average incomes cannot provide housing, health care, food, and other necessities. Poor and middle class people, confused by anti-tax propaganda, vote for tax cuts that actually lead to big tax increases on themselves.
• Anti-tax extremists argue that redistributing wealth or trying to transfer wealth from rich to poor doesn’t work and is bad for everybody. But transfer of wealth is exactly what has happened in the last years, transferred from the poor and middle classes to financial wizards who enjoy playing with money. And these are the people who created the financial crisis.
This is America, supposedly the land of opportunity. If top incomes were fairly taxed, if our entire tax code didn’t direct wealth upward to a few financial heads, how much of our nation’s economic mess could be relieved! And our infrastructure needs. Our educational, environmental, and social needs.

Common sense as well as our inherent sense of justice should make us cry out with shame that our society savages the needy while sheltering obscene wealth. No society with vast disparities of wealth can long endure.

Injustice 2, May 13
In a comment, Florian argues that it’s “sort of a law of the universe” that 80% of the population does the work while 20% manages and rules. He concludes,
“… in the field of management . . . it is often said that 20% of your workers will do about 80% of the work. . . . Sure, everybody works, but only a fraction of all of us (say 20%) actually make such impactful contributions to society as creating jobs, creating new inventions, or being civic leaders. Perhaps it is ‘justice’ that the top 20% reap 80% of the rewards,” [and this happens] “naturally in free society with a free economy.”
“Liberals want to impose redistributionist policies to make things more ‘fair’ or ‘just’ . . . That might sound just, but it is not so natural. . . .
We don't equate the free, voluntary transfer or exchange of wealth in a free economy with the imposed, non-voluntary redistribution of wealth by a government.
His arguments one at a time.
1. “Redistributionist policies” are precisely what happened in the last 30 to 40 years, but in the wrong direction—toward injustice. Since the 1950s, at a gradually accelerating rate, wealth has been transferred from the poor and middle classes to top incomes. This upward direction of wealth happened as a result of deliberate tax and regulation policies.
The national debt quadrupled between 1980 and 1992 (during the terms of Presidents Reagan and first Bush). George W. Bush would repeat Reagan’s policies and double it again between 2000 and 2008.
Meanwhile, the share of national income going to the top 1% more than doubled, from 9% to 24%. The share going to the top one-tenth of 1% of income earners more than tripled.
We now have the most unequal distribution of income in the developing world and the inequality is growing rapidly.
During the term of George W. Bush, before the near economic meltdown, Nobel laureate Paul Krugman analyzed the dramatic shift toward concentration of wealth in the hands of a few.
Thanks to the right’s well-funded and organized effort, corporate executives now feel no shame in lining their pockets with huge bonuses and gigantic stock options. Such self-dealing is justified, they say: Greed is what made America great, and greedy executives are exactly what corporate America needs.

. . . there has been a concerted attack on the institutions that have helped moderate inequality — in particular, unions. . . . Business interests went on the offensive against unions. . . . once Ronald Reagan took office, the anti-union campaign was aided and abetted by political support at the highest levels.
2. “Free, voluntary transfer or exchange of wealth in a free economy” is NOT what concentrates wealth in our country; it is imposed on the many by a few. The rich protect their privileged positions by swarming Congress with lobbyists.
“ . . . he worried that the lobbying prowess and financial resources of Wall Street firms . . . had the potential to outmuscle their opponents, which want greater regulation.”
Members of Congress rely on their own riches plus money from other rich to get elected and re-elected. Vast armies of corporate lobbyists infest Capitol Hill while members of Congress spend substantial amounts of their time soliciting campaign contributions.
“Yes, we peddle political influence, but, hey, it's not illegal, . . .”
As an example of money’s power, a study found that the campaign for eliminating inheritance taxes was funded mostly by 18 super-rich families.

3. As for the claim that the rich earn their obscene profits by higher productivity and greater contributions to society, Nobel laureate Joseph Stiglitz demolishes that argument.
The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance).

Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.
CEO’s of large banks gamble with money laboriously earned by ordinary workers who invest in houses, pensions, and stocks. The CEOs of large banks and corporations enjoy manipulating money. That’s how they differ from ordinary workers—nurses, construction workers, plumbers, miners, clerks, technicians, and so on. Do those who enjoy investment games make a greater contribution to society? Of course not.

I'm not talking about the rich people that most of us know. Their wealth pales in comparison with the top 1 and 2 percent, and they have no designs like those who command Wall Street and are described by Stiglitz. They’re not intent on taking an ever-greater share of the pie but use their money to help others. We need to distinguish between the moderately rich and the obscenely rich.

Some of the most valuable members of society work for a pittance or no money at all—sisters and monks who enhance spiritual life, emergency-responders of all kinds, teachers who sacrifice for at-risk kids, garbage workers, nursing home workers who change diapers on the old . . . this list could go on for a very long time.

The triumph of greed in America cannot be attributed to “natural” dynamics in a “free” economy.

Correction: Florian protested that I misrepresented his comment by saying the 80/20 rule means that 80% do the work while 20% manage and rule. I accept the correction. He said, the 80/20 rule means that 20% own 80% of the wealth and 80% own only 20% of the wealth and “this has probably been the case in most large societies throughout history.”
I leaped to the implications of "own" by saying “manage and rule,” which generally is true and today has assumed grotesque proportions, as tax policies create mal-distribution of wealth incomprehensible to most people. The 80/20 theory ignores the slow but real trend toward ever greater democracy in world history, and it assumes injustice must accepted as inevitable in human societies—something decisively refuted by just societies throughout history.

Wealth injustice, May 23.
I sent the following to the PBS ombudsman and to an email group.
Dear PBS
I challenge you to defy your corporate sponsors and do a series on the squandering of our national resources through the concentration of wealth in the U.S.
• Examine the tax and deregulation policies that direct the vast wealth of our nation into the hands of very few.
• Investigate how corporate money influences federal and state governments, controls media, directs the flow of information, and forms public attitudes.
• Demonstrate the inefficiency of an economy that thwarts the talents of the many to enrich the few.
• Show how social programs yield returns in dollars many times more than the original investment.
• Expose the grotesque tax code that treats an income of less than half a million ($379,150) the same as incomes rising to hundreds of millions and even a billion.
• Compare the gross disparity of income in the U.S. today with other systems such as feudalism and the Gilded Age.

“America, land of opportunity” cannot be sung anymore. Please educate our citizens about the gross inefficiencies and injustices in our system, all deriving from misdirection of our national wealth.

This generated enormous email traffic for me, almost all of it supporting my message. Here are a few samples. Mary Lou:
I am reading Howard Zinn's A People's History of the United States: 1492-Present.
A lot is still the same as relates to the rich making sure the playing field is slanted in their favor. That book and your letter are eye-openers that many in our world either don't want to know or are too busy trying to make a living so have no time or energy to search out alternative news because our media are also owned by large corporations.
Warren:
Why don't more of us speak out about tax unfairness? Because so many of us benefit from it in our own ways, and we don't want to take a chance on hurting ourselves. I am in Northern Minnesota now and for much of the summer, and I watch numerous small businesses, often family operations, who use every aspect of the tax code to their advantage. That's what accountants are for. Expensive gas? Not when all your travel is a "business expense." Expensive vehicles and boats? Not when every one of them is a "business expense."
David:
Jeanette, have you seen the documentary, “Capitalism, a Love Story” by Michael Moore? It was released as a movie in 2009 and it outlines most of your points about how capitalism is working in America. The problem is most middle class Americans like to think they are well off and buy into the lies told by the truly wealthy to keep them quiet. Warren Buffet when asked if there was a class war in America said, “Yes, Oh and by the way, we’re winning.” Buffet’s comment was widely quoted, and by many taken as a joke, it wasn’t. . . .

I have had friends who because they have a nice house and are comfortable, consider themselves well off. They buy into the republican dogma, the tea party dogma, without question, railing on about no new taxes and gov’t waste without ever realizing that they are way below the income level protected by the tax strategy of wealthy republican policy-makers. They were against health care reform because it was labeled socialized medicine. Big government to them is automatically bad, but big business they give a free pass. I don’t get it.
I don’t necessarily trust big government and I certainly don’t trust big business, but I do see that there needs to be a balance. Right now in America there is no balance.
People are losing homes, jobs, and their life because a few super wealthy individuals and corporations are more interested in profit than the well being of the American people. The government is the only thing big enough to do anything about the actions of this elite group. Unfortunately, many politicians are bought and no longer represent the people they are supposed to serve.
Don:
Jeanette, to explore in depth the consequences and implications of income inequality in Western society, especially the US, I recommend you read Spirit Level: Why Greater Equality Makes Societies Stronger (2009) by Richard Wilkinson & Kate Pickett, Foreword by Robert B. Reich.
An anonymous person responding to David’s friends who “buy into the republican dogma” wrote,
Well, if you are in a nice house and are comfortable, then you well off. So what’s to complain about?
This topic to be continued....
Next time—Republicans with a conscience.

2 comments:

Florian said...

Jeanette says, “The richest 1 percent owns 34 percent of our nation’s wealth—that’s more than the entire bottom 90 percent, who own just 29 percent of the country’s wealth.” A table on the web page that Jeanette links to also shows that the bottom 80% own roughly 20% of the country's wealth, rounding numbers to the nearest 10%. This is the case whether we are speaking of the present or thirty years ago. Far from being an anomaly that “no society can long endure,” this has probably been the case in most large societies throughout history. This is due to the so-called “80/20 rule”.

The 80/20 rule is sort of a law of the universe that applies to a wide variety of phenomena. It is well-known in the field of management, where it is often said that 20% of your workers will do about 80% of the work, and vice versa. I would think that this applies to society at large as well. Sure, everybody works, but only a fraction of all of us (say 20%) actually make such impactful contributions to society as creating jobs, creating new inventions, or being civic leaders. Perhaps it is “justice” that the top 20% reap 80% of the rewards, or 80% of the wealth.

The 80/20 rule does not have to be imposed through government legislation; it will be followed naturally in free society with a free economy. Liberals want to impose redistributionist policies to make things more “fair” or “just”, so that the top 20% have closer to 20% of the wealth, or something like that. That might sound just, but it is not so natural. Such redistributionism fights against the 80/20 rule, a universal law that often naturally prevails anyway. So, the opponents of liberals (Jeanette calls them names like “anti-tax extremists”) argue that redistribution of wealth doesn't work. The goal of redistribution, the equalizing of income, is not a necessary goal anyway, as I explained in an earlier comment.

Jeanette almost concedes the point, but then she argues, “But transfer of wealth is exactly what has happened in the last years, transferred from the poor and middle classes to financial wizards who enjoy playing with money.” No, Jeanette, we don't equate the free, voluntary transfer or exchange of wealth in a free economy with the imposed, non-voluntary redistrubution of wealth by a government. We must remember that the operative syllable in the word redistribution is the prefix “re-”. It refers to another distribution of wealth that takes place after an initial distribution by the free market. Redistribution is designed to cancel out some of the effects of the free market, namely, the supposedly unequal effects. It is a form of interference with the free market, which is why the “anti-tax extremists” believe that it doesn't work.

Jeanette makes it sound like the rich unjustly took (transferred) from the poor wealth that belonged to the poor. This has always been part of the leftist narrative; the left always convicts the rich of this “injustice” without putting any of them on trial. But we know that the poor never owned the wealth in the first place, for they were poor. The wealth never existed until it was created as the economy grew; and it was then distributed freely through the operation of the free market. It makes no sense to call this “injustice in America”, as if the operation of a free market is a genuine example of unjust activity.

Kathleen said...

This article is so timely and poignant. The current budget under discussion is clearly a moral issue.
Jeanette, thanks for your clear writing and the inclusion of your references. Fantastic.