Wealth Fails to Trickle Down to the Lower, Working Classes
Forbes is up to its old tricks. Once again it celebrates the wealthiest among us with its annual Forbes 400. The minimum entry fee for this exclusive club is a net worth of $1.3 billion. Once upon a time, during the hardly socialist era of Reagan’s America, a mere few hundred million would suffice. Any time a leftwing columnist worries about escalating wealth, he or she is accused either of envy or of failing to recognize the benefits everyone derives from the accomplishments of the wealthy elite. There are, however, sound reasons to worry about the causes and consequences of gaping wealth disparities.
When some populists, socialists, and ’60s radicals bemoaned what they regarded even then as unacceptable wealth disparities, they met a familiar rejoinder: Even if a socialist government were to confiscate a large portion of these fortunes for redistribution to the poorest third of the population, these sums would not dramatically enhance the circumstances of the poor. An argument of this sort has less power today.
Journalist Holly Sklar points out that the Forbes 400 now has a combined net worth of at least $1.54 trillion, more than a tenth of the nation’s Gross National Product. Were even a third of that (circa $500 billion) redistributed to the poorest third of our population in health care, education, public transit services or even reductions in Social Security taxes, etc. it would make an immense positive difference in their lives.
No one, even on the left, is proposing such a vast transfer. Nonetheless, arguments that most of the rest of us have benefited from the gains made at the top are problematic. Edward Wolff of New York University points out that between 1983 and 2004, the average wealth of the top 1 percent of households grew by 78 percent, while the bottom 40 percent lost 59 percent. The benefits of wealth accumulation have failed to trickle down.
One consequence of the economic distress of those at the bottom is that if the basic social services on which equality of opportunity is based are to be funded adequately, sources other than taxing poor and working-class income must be found. And borrowing against future generations has its limits.
Liberal Democrats advocate repeal of Bush-era tax cuts, which have disproportionately benefited the wealthy. Since our total tax structure, including Social Security taxes and state and local income and sales tax, has become much less progressive over time, such a change is long overdue.
Though polls suggest American citizens would support such reforms now, many working-class Americans still shrug off or even resist any tax increase. They assume that they too will become rich, either by working hard or developing a new product or just through luck. Call it Powerball politics.
Some might change their minds if commentators, even those on the left, did more to remind citizens that many of today’s wealthiest did not, as the Smith Barney ad used to say, “Make money the old fashioned way, they earned it.” Behind many of today’s great fortunes lie abuses of power and privilege by those already well placed. In addition, not only have these actions failed to bring the poor and working class along, they have contributed to their problems.
Sklar points out that much of today’s great wealth comes from Wall Street speculation. The current difficulties in the subprime mortgage market are symptomatic of larger pathologies. Guardian (London) business writer Will Hutton points out: “lending 100 percent mortgages to borrowers with no income, employment or assets, packaging up the resulting debt and selling it to banks around the globe while taking a handsome fee on every transaction - can be launched with impunity.”
Conflicts of interest and abuse of insider information taint the entire system. The firms issuing the new securities pay the purportedly impartial rating agencies, Moody’s and Standard and Poor. The Bush administration touts the freedom to create these new exotic financial instruments. Nonetheless, when the whole system eventually starts to implode, the same insiders who once demanded freedom from government beg the Federal Reserve to opens the discount window to keep big financial houses from failing.
Federal bailouts, either through Fed interest rate cuts or direct subsidies, have allowed the big investment banks to escape the emerging markets and long-term capital management debacles of the ’90s only to plunge the U.S. economy into a tech stock bubble and now a housing bubble. The biggest financial players not only escape but also often prosper. Many manipulated borrowers, investors who don’t manage or own elite firms, or simply aren’t privy to inside information lose their houses and other assets. High tech and housing markets are overbuilt and then subject to equally extreme retrenchment.
The Fed should take the risk of economic collapse seriously, but the underlying sources of both our vast inequalities and our dangerous market volatility need attention from federal regulators. Otherwise, taxpayers and ordinary citizens not only won’t become rich. They are going to continually bear the brunt of saving financial Goliaths from the messes they create.
John Buell is a political economist who lives in Southwest Harbor. Readers may contact him at jbuell@acadia.net
© 2007 The Bangor Daily News
Not only do the super-wealthy gain such wealth through parasitic activities, and not only does the accumulation of such wealth further empower them to engage in more and greater parasitic activities, but that wealth enables them to further corrupt and pervert our political system and our culture, and all the while bully the rest of us and lower the quality of our lives as they pursue their grotesque pleasures.
Let’s not be afraid to say middle/working-class in the same sentence. I noted that even Wellstone didn’t often lump the two together. Today, the middle-class IS cash poor.
But the fact of the matter is that there is little left of a middle-class. With “negative savings”, less equity since the Great Depression, huge price of college tuition, etc. I’d like to see a hypothetical example of a young middle-class family in the under-40 category today. With median home prices in many areas $300-500K. What’s middle-class today? Annual income around $150K+?
Hmmm…seems to me we are rewriting the recipe for social upheaval. Reminds me of a certain group of aristocrats right before the French Revolution…so optimistic, so smug, so shocked when they suddenly found themselves being hauled off to the guillotine. It probably wouldn’t get that drastic but then, simmering anger can turn into meltdown PDQ.
“…so shocked when they suddenly found themselves being hauled off to the guillotine.”
Bring on the guillotine, Citizen. Bring it on!
This is just plain obscene, and of course those that are in the upper income brackets, for the most part, look after each other, and play the game to make themselves more wealthy at the expense of those who have less. Bush has a lot to answer for, he has just exacerbated this situation with his policies, and he sees nothing wrong with what he has done. The blind leading the blind.
Any Democratic president who does not make repeal of those tax cuts for the wealthy job number one will not maintain our trust for long.
The pathetic state of mainstream culture and its obsessions (Parris Hilton and her rescue of drunken elephants indeed) is the clearest indicator of what the world becomes under a system in which simply being rich is considered grounds for world leadership.
According to capitalist ideology, we ought to be experiencing a renaissance. Instead, most culture continues to decline and grow even more pin headed and gross. That, more than anything else I can think of, is grounds enough for revolution. I’ve been poverty stricken, I can handle it again. Just don’t bore the piss out of me, alright?
Havn’t you heard? Wealth trickles upwards.
That’s funny, I’ve alwas thought of and felt it like the deluge up economic theory and policy, practiced by faithfull repugs and dems (Biden et. all) alike.
Recall Feinstein and Pelosi, impeach Cheney and Bush and for god’s sakes, ride your bike!
Ahh yes another plea for more tax-subsidized social programs. I concur! However, true, effective socialism won’t work until we reduce globalization, outsourcing, and the 3rd-worldization of the USA. No country can afford to solve the world’s poverty problems through excessive tax-subsidized programs by a demographic group who doesn’t adequately contribute to sustaining its funds.
But it sure reads well in theory!
When 10 percent of the population controls 80 percent of the wealth in our country, something is radically wrong. What is worse, is that that top 10 percent is changing the rules to prevent anyone beneath them from joining the club.
As opportunity disappears in this country, more and more people are backed into a corner and people backed into a corner can become very dangerous.
We need to return to programs that create incentive for growth, research and development in THIS country… programs that encourage education, creativity and employment opportunities or someday there will be more fighting in our streets than there already is among the drug gangs.
All a person has to do is visit another country where there is a great disparity between the haves and the have-nots to see the dangers ahead.
Do our wealthy people wish to live behind barred windows and high walls? Do they WANT their streets so dangerous that they need bodyguards? Do they WANT corrupt police and government officials? Do they want the U.S. to turn into MEXICO or COLUMBIA?
I love the title of this Bangor Daily News article: Wealth Fails to Trickle Down to the Lower, Working Classes
After all these years of capitalist endeavor precisely for the purpose of making it flow in the opposite direction, this is still news?!
Next thing we know, they’ll be informing us that capitalism itself is based upon greed, pure and simple. It’s supposed to be tempered by a competitive marketplace and by representational ‘common good’ oversight on behalf of us ordinary folks. But we, at least those of us not totally blinded by the incessant propanda, know that neither of those ameliorating factors is working very well these days.
I think the article was suggesting that modern forms of exploitation (capitalism) were beginning to slip to pre-modern proto-capitalism forms (feudalism).
In the past, large numbers of people could just colonize to where the grass was greener. Where’s that place now?
“Trickle Down Theory” is a lie.
It is a ruse to hide supply-side economics failures and malicious intent.
“Trickle Down Theory” does not work. It is “voodoo economics.”
Trickle-down economics is marketing ploy for the true Reagan, et al, approach: the “PISS ON YOU” approach.
I have referred to this website before, but please look at it if you haven’t.
http://www.inequality.org/
Click on “By the Numbers”. If you page down, you will find pie charts showing the very skewed distribution of wealth and stock ownership in this country. It is truly frightening.
Socialism for the rich and capitalism for the poor seems to be the matra of the elites.
UGHHHH!
There is a fatalism to great wealth. As if the rich and powerful have given up on a good future for most and said f’k it we’re grabbing all we can at the end of the good days.
The wages of SPIN is a lot of bills. Whether we think someday we will be rich may be an underlying hopefulness but in reality the tax cuts are presented as general tax cuts implying everybody somehow benefits. Most people don’t realize their taxes weren’t cut except by a few tens of dollars but tax cuts for the wealthy brought big borrowing bills which will be paid for by everyone’s taxes. The end result of course being reductions in funding for services and programs that help everybody who isn’t rich. Not rich enough to help themselves to as much as they can grab!
Save paris hilton!!! Repeal the estate tax.
Feudalism? Neo-feudalism. Everything but the titles…m’lud! We probably won’t have to address the unitary executive as sire … probably.
Piss on the poor indeed. The only way that income has ever been redistibuted is when the “elite’s” have had a good deal of fear for their lives. Same shit from the dawn of time… What was that old classic punk tune I listened to in my teens; oh, yes, it was “Eat the Rich” can’t remember the name of the band tho…
A shame really that since the days of the French Rev, more and more of the uber rich have better figured out how and when to flee the country.
Mr. Bramscher,
If someone in the middle class falls into poverty, then they are poor. However, the mere fact that a middle class person is living in that 300K home, and is even able to consider paying for his kids college education still implies a level of wealth and living standard that is far from poor.
When the middle class family must move into a dilapidated apartment in a rough part of town, and couldn’t even consider paying for a kid’s college education, then they are poor.
I frankly find politicians’ talk of “the middle class” while never uttering the phrase “the poor” to be not so subtly racism-tinged code language.
Freud’s tripartite model of the human psyche can be used to understand corporate capitalism’s basic pathology.
Capitalist accumulation is based on the Id: sexually motivated greed/fear (Cocaine, Sex & Wallstreet)
The Super-Ego would be forms of state regulation, non-capitalist states or peoples’ organizations that control the Id.
Of course, with a balance between the Super-Ego and the Id, an individual or society gains a healthy Ego (reality testing mechanism).
Contrary to what people may want to believe, the presence of the Eastern Bloc, strong unions, active civic organizations,public ownership and well funded regulatory agencies forced US capitalists into regulating their
Id-motivated excesses.
The capitalist elite had to deal and compete with these Super-Ego structures. As i result, a culture emerged that became increasingly healthier in reality testing (Ego), i.e., progressive.
However, the corporate elite started a sustained attack against all forms of the Super-Ego. And much of it has been abolished.
As a result, we live in a chaotic, infantile culture that produces short-attention spans, limited intellectual development and sophistication, an inability to deal with deferred gratification, emotional immaturity, a greater reliance on unthinking, faith-based religions, etc.
What trickles down is not wealth…it is an increasingly underdeveloped Super-Ego and Ego.
The choices are
1. Earn up and treat your employees and other stakeholders the way all owners should.
2. Move to another country that is more socially sophisticated, such as Norway or Switzerland.
3. Be willing to throw everything else in your life away for the sake of fighting it with every ounce of energy.
My personal choice, so far, has been option 1. But, there are days where options 2 and 3 have considerable appeal.
” Move to another country that is more socially sophisticated, such as Norway or Switzerland.”
They don’t want you. They have pretty tight immigration standards.
This highlights what Riane Eisler talks about in her book, Real Wealth of Nations…creating a caring economics. What we currently have is a dominator value system that essentially teaches that its okay if a few at the top have the most–and we all have accepted this. What Eisler shows you is why it doesn’t have to stay this way. Check it out…there are solutions.
www.rianeeisler.com www.realwealtheconomy.com
provoice -
“Do our wealthy people wish to live behind barred windows and high walls?”
They already do and have for some time.
“Do they WANT their streets so dangerous that they need bodyguards?”
Most of the wealthy are hotdogs.
“Do they WANT corrupt police and government officials?”
What planet did you grow up on?? Our ‘police and government officials’ have been corrupt since LONG before I was born and I’m approaching 50.
“Do they want the U.S. to turn into MEXICO or COLUMBIA?”
The question is not, ‘do they want this’ but WHY DO THEY WANT THIS.
ex
The inevitable responce to trickle-down economics is trickle-up bullets. The coporatations have done so much damage to our political system and to the middle-class and working families in this country that the only way to put our Democracy back on track is to tear it all down and start over.
yup, Reagan talked of the “Trickle Down” theory often,
I think he was actually thinking of the piss that ran down his leg, letting the poor and middle class have that.
I think I was 16 years old during the Carter - Reagan election, when I heard Regan say that he was going to reduce taxes, increase military spending, and balance the budget. I didn’t have my university degree in economics yet, but even with a high school education, I could figure out that the math didn’t add up.
When Reagan was elected it signaled the end of the U.S. as an economic superpower. If we hadn’t stumbled upon high tech, we would have been done, a long time ago.
Reagan flew the flag and stole a Bruce Springsteen song. And our high school educated blue collar manufacturing union members, joined evangelical churches, watched top gun, drank a bud, voted for Reagan, and had their jobs shipped overseas as a thank you.
It was one of the greatest cons ever pulled. They still think he’s a hero!
Ramsay
“lending 100 percent mortgages to borrowers with no income, employment or assets, packaging up the resulting debt and selling it to banks around the globe while taking a handsome fee on every transaction - can be launched with impunity.”
It is only speculation when they keep selling debt and a pipe dream if they think they will collect from people who have no money.
PJD,
I don’t know anyone in the demographic I mentioned earlier (under-40, young parents, a stay-at-home spouse) who’s sitting in a $300K home and thinking about sending kids to college. On the contrary, my home was bought for less than half that, and we’ll still be paying my wife’s student loans when my oldest is of college age.
Where is this supposed middle-class?
It’s not the people who own the most equity, apparently, but the people who own the most debt?
I always refer people to this site: http://www.nhc.org/chp/p2p/.
Maybe I’m more jaded than you. Minneapolis/St. Paul lacks the scene and scenery of the coasts and while it’s cheaper to get a home here, the ratio of salary:housing is not good. Especially if you’re single — there are very few occupations that’ll allow you to purchase a home. That is, to service a mortage for 30 years. Check out the data.
I recall that you lived in Lexington, KY. I see that computer programmers are doing a LOT better there, relative to cost of living, than they are doing in Minneapolis/St. Paul. Good place to live down there?
Skippyagogo__ I believe you stated it correctly, the rich will not give up any of their ill gotten wealth unless they have fear of drastic action against them. This argues for taking a leaf from the Bushco book and making a pre-emptive strike on them. It appears they are trying to slowly stamp out all opportunity for a decent life for poor and middle class folks and appealing to their sense of fairness is a waste of time. A country that gives many millions to CEO`s and other favored persons, then large tax cuts so they can keep it all is in a hopeless condition and cannot help but suffer a bleak future.
My concern is with how all this deregulated cowboy capitalism is going to play out–and I mean “play out” like a gold mine.
Our country is looking at a convergenge of events that is anything but harmonic. We have a war debt that will exceed 1.5 trillion dollars, which we have borrowed for. We have China, holding huge reserves of dollars because of our trade imbalance with them, now looking to switch to Euros. We have an economy utterly dependent on oil as supplies and production peak and decline. And we have the worldwide crisis of global warming, which could devastate agriculture in marginal climate zones and lead to escalating migrations of people searching for food and water, never mind jobs, as is the case now.
If ever there was a time crying out for wise and humane leadership, it will be this coming century. It looks so hopeless now, and there will be those four horsemen; but not an apocalypse, not Armageddon, end of times or any of that garbage. Heroes will emerge, but only when worse comes to worst. That’s how it usually happens. I think by 2100AD, the US will be poorer, more like Detroit or Costa Rica, but actually more liveable than now. The secret will be in the outlawing of great wealth.
“Trickle down” defined:
1) Don’t pee on me and tell me it’s raining.
2) The rich get golden parachutes; the rest get golden showers.
This wealth disparity is so incomprehensibly great that I have a sinking feeling that the pillaging is more direct than I had realized. When the Fed (banks) are printing the incalculable sums of money, that money is worth far more at the time of its creation than it will be when the inflationary effects of its presence “trickle down” to the rest of the market. Are these people actually just blatantly siphoning off liquid cash from the supply flow and investing it in the commodities (precious metals, primarily) that they well know will spike in a hyperinflationary environment? That would explain the disappearance of the M3. Any thoughts?
My friend is seriously considering moving to another country because he can’t get free housing or free college education here. He suffers from depression and as a result, can’t really work(it is very hard for him to get out of bed due to his depressed state). All he his asking for is free housing, medical marijuana to treat his depression and a small monthly stipend. He would even go to college if it was free.
That’s not too much to ask, is it? Crappy fatcats hoarding everything to themselves. My friend is entitled to be happy.
Balakirev - you have put your finger on exactly what goes unseen in understanding ourselves-in-context.
How to get enough of our well meaning reformer fellows to understand it, and take action in light of it — would be the next problem.
But it helps to name it. Good for you.
” “…so shocked when they suddenly found themselves being hauled off to the guillotine.”
Bring on the guillotine, Citizen. Bring it on!”
I think I’ll next-invest in rocking-chairs…
But how can that be? They are giving up to 20K just for signing up bonus for Iraq and Afganistan.
“Edward Wolff of New York University points out that between 1983 and 2004, the average wealth of the top 1 percent of households grew by 78 percent, while the bottom 40 percent lost 59 percent.”
If you think these figures are obscene, watch the increase for the top 1% that takes place over the next 5-10 years after the U.S. outsources another 40% of its jobs and increases the number of work-visas to foreigners who will take away more jobs from U.S. Citizens.
Do you wonder why Dennis Kucinich either wants to get us out of or modify the WTO and other trade agreements that were designed by and for the super-wealthy?
Kucinich IS our only hope!
Gail,
We can’t afford to pin our hopes on singular politicians who can lose singular races, have singular accidents, and fight a system rigged against them.
At this point I’d say our ONLY hope is:
1) A national progressive candidate effort. I’m thinking at least 100+ progressives running simultaneously for races around the country who are bound tightly by platform, acknowledge a common cause, etc. They spread the word via the internet, YouTube, etc. No reliance on MSM at all. I like to think of them as the Knights of the Progressive Order.
2) Or a revolution. Zinn is probably correct.
If there is ONE THING that ‘68 (failure of Eugene McCarthy to get the Dem endorsement) and ‘72 (failure of McGovern to win over Nixon) should have taught the anti-war movement it is this:
DO NOT PIN YOUR HOPES ON SINGULARITIES. We need a brotherhood/sisterhood progressive peerage.
How come the peasants are not revolting?
Is training, ignorance or cowardice?
Maybe you all should get your kids to stop reciting that pledge of allegiance, it is a pledge breached as spoken and rendered more a caricature with every treasonous act emanating from the White House.
Maybe the generation that grows up without such nonsense in their heads will register as responsible adults.
Join a union, create a union, participate in that union. Time to start social clubs get everyone weaned off corporate entertainment. Organize group outings to the countryside for forage, start getting to know the farmers again.
Never ever help out or give anything to the rich for free, by and large the wealth of the rich was unearned, tax them heavily.
The only trickle down I have seen in my lifetime has been the rich peeing on the poor.
This discussion usually ends up with change advocates being called socialists engaged in class warfare rhetoric and a false argument that the super rich pay 30 percent of their income while the average middleclass families pay about 15 percent. The reality is that many of the super rich do not pay even that 15 percent the middle class families are paying.
They are using offshore banking and other loopholes to not pay taxes. The bank huge sums of money off shore inorder to not claim it on their taxes. If this one loophole was closed, IRS would increase its revenues by hundreds of billions of dollars each year. The IRS invariably pick on middle class and working class taxpayers for what amounts to “chump change” in comparison.
Paul Bramscher November 14th, 2007 10:53 am
Gail,
“We can’t afford to pin our hopes on singular politicians who can lose singular races, have singular accidents, and fight a system rigged against them.
At this point I’d say our ONLY hope is:
1) A national progressive candidate effort. I’m thinking at least 100+ progressives running simultaneously for races around the country who are bound tightly by platform, acknowledge a common cause, etc. They spread the word via the internet, YouTube, etc. No reliance on MSM at all. I like to think of them as the Knights of the Progressive Order.
2) Or a revolution. Zinn is probably correct.”
Paul,
I completely agree with you; and Zinn’s idea seems the most likely to occur, but I will not give up on the possibility that Kucinich may still have a chance in this race in addition to adding other like-minded progressive thinkers to lead this country. Who knows what tomorrow will bring? Meanwhile, my focus will remain positive, simply because I refuse to give up on hope.
There is something trickling down from the wealthy classes to the poor and middle class, its urine. The poor and middle class have been losing economic ground since Reagan and any politician who points that out is accused of inciting class warfare. ….
The War is over and the rich have won….
They don’t want you. They have pretty tight immigration standards.
Yes they do. They have no interest in importing the worlds poor to eliminate their middle class and take the jobs from their own entry level folks.
But keep supporting illegal immigration and help these nice rich folk get a lot richer. Take a closer look at the extremes of both right and left……they are much the same.
Ronald Reagan touted his ‘trickle down’ economics! It didn’t work then and it still doesn’t work! But, tell that to the American voters who runs to the polls and votes Republican to keep their gun, restrict abortion or mistreat gays. While they suffer financially from the mess the Republican’s ‘trickle down theory’ always creates. The voter needs to be reeducated. I am not really certain how to do that. But, I don’t think the situation in this country is ever going to improve until the voters start voting for the good of the country instead of their own selfish self interests.