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The Big Obscenity: A Trillion Dollars a Year to the Richest 1%
(That's seven times more than the budget deficits of all 50 states combined)
If you make less than $114,000 a year (90% of us), you've been financially damaged by the flow of income to the richest 1% of Americans over the past 30 years. Based on Internal Revenue Service figures, if middle- and upper-middle class families had maintained the same share of American productivity that they held in 1980, they would be making an average of $12,500 more per year.
If you make less than $160,000 a year (95% of us), your household value has decreased, percentage-wise, over the last 25 years. According to noted researcher Edward Wolff, only the top 5% of American families increased their percentage of the country's total household net worth from 1983 to 2007.
U.S. GDP has quintupled since 1980, and we all contributed to that success. It's not unreasonable to say that upper-middle class families should have maintained the same size of their slice of pie.
But if earnings since 1980 were based on this measure of productiveness, the richest 1% of Americans would be making $1 trillion less per year.
A trillion dollars a year. That's more than we spend on the entire military.
A trillion dollars a year. That's seven times more than the budget deficits of all 50 states combined. Many states have been forced to cut police forces and teachers to balance their budgets.
A trillion dollars a year. Yet Congress just voted to continue the Bush tax cuts.
The richest 1% ($400,000 or more) didn't work harder than the rest of us. They profited from stock market gains, shrewdly designed financial instruments, and tax cuts.
The very wealthy insist that all their income will stimulate the economy. But low-income earners spend a greater percentage of their overall income on consumption, while high-income earners save more. Middle-class America has been led to believe that the growth at the top will eventually produce more jobs. But many of us have college-educated sons and daughters who can't find suitable employment. Fortune Magazine reported that the 500 largest U.S. companies cut a record 821,000 jobs in 2009 while their collective profits increased to a record $391 billion.
Even the upper class should be concerned about this. As inequality increases, the majority of Americans will consume less, leading to conditions not unlike the years before the Great Depression, when the working class was unable to buy the goods they produced. The rich, with extra money, speculate in risky investments. The majority of middle-class Americans, with little money, go deeper into debt. The result is an unstable economy for all of us.
Who are the people making up the richest 1%? Bankers, CEOs, upper management, university presidents, Congressmen. They live in their own world, supporting each other's needs. They can no longer relate to the needs of average Americans.
Taxing them is not "soaking the rich." The greatest redistribution of income in history has taken place over the last 30 years, and the victims are beginning to make a fuss about it.
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129 Comments so far
Show All"There really is no controversy about this, except from the extreme right wing fringe."
LOL! A statement like is unsupported and serves only as an attempt by you to halt serious discussion, and I will decline that attempt and will look for your reply. It is your turn now to provide some sort of support of what you say from the main stream. Lincoln has little standing as a main stream expert in economics, so I would suggest someone else.
Your problem is in wrongly equating "labor" and "human beings". That is *simplistic*. Capital and labor have always been integrated, often right there in the human being. Look up "Human Capital" which is a subset of capital, and an idea that comes right from the *main stream*.
How do you think wealth is created? By investors? By inheritors? By bosses? By management?
Wealth is distributed right from the point of production - obviously. The average worker is producing $120,000 per year and being paid less than $40,000 per year. That is where wealth is distributed - into the hands of the few and away from the many, those who are producing it.
The poorest of the poor pay massively in taxes - fees and taxes of all kinds on everything.
No one is talking about "knocking The Evil Rich down to size."
"By investors? By inheritors? By bosses? By management?"
All can play a part.
"The average worker is producing $120,000 per year and being paid less than $40,000 per year. "
Accepting this as true, this is *always* through using tools, equipment, materials, facilities, infrastructure, and/or sales networks etc. provided by the employer, and *not* through his own faculties exclusively. IOW, the 40K is only a *part* of the total costs to the employer for the 120K production.
"No one is talking about "knocking The Evil Rich down to size"
I addressed that earlier, often people *do* make this argument but I already agreed iI jumped the gun on it in this thread.
Large infrastructure projects, necessary to production - tools, networks, technology facilities, etc. have primarily come from government, from public investment. Without that as a prerequisite to all business activity there would be no possibility for investors and owners to play their games. They are parasitic on the public - that is the historical record, not an opinion or ideology.
Your "it is only a *part* of the total costs to the employer" remark begs the question. The $40,000 income of the worker is also only part of the picture as well. The tax man, the banker, the insurance man, the doctor, all still need to be paid.
You are arguing, I think, that the $80,000 - the two thirds of the value crated by workers that is skimmed of - is re-invested and is what drives the economy. Yet here we are in a dire crisis caused by the fact that what you claim should or does happen is not in fact happening - the opposite is happening. The %80,000 goes to where it can make the fastest and biggest return, it is not re-invested to any benefit for society, and it is invested more and more into things that are destroying the society and destroying the survivability of the human race. Other than that - great theory. It has been tried and tested and it has failed - failed beyond any failure in human history. Like the drug addict, you are arguing for just one more hit, just one more chance to prove that it can work. We can't afford to carry you and your allies anymore, you have become an unsustainable drain of human society, a luxury we cannot afford. It is killing us.
"Large infrastructure projects, necessary to production - tools, networks, technology facilities, etc. have primarily come from government, from public investment. "
Nonsense, there are trillions in this stuff owned and developed privately. And even if what you say is true to some degree, which it is (roads etc.) there is no public investment that isn't first taken from the fruits produced by the private sector.
"Without that as a prerequisite to all business activity "
Nope, the true prerequisite is the private sector.
"The $40,000 income of the worker is also only part of the picture as well. The tax man, the banker, the insurance man, the doctor, all still need to be paid."
Those are all workers as well. They are part of the "average". I don't see your point.
"You are arguing, I think, that the $80,000 - the two thirds of the value crated by workers that is skimmed of - is re-invested"
Yes, or invested previously to the hiring of the worker. Most of the time.
"Yet here we are in a dire crisis caused by the fact that what you claim should or does happen is not in fact happening"
It *is* happening. I am getting paid right now by a risky start up firm. And you are ignoring other causes of the "crisis" such as monetary and fiscal policy and increased global competition.
"great theory. It has been tried and tested and it has failed"
False. Nothing in Economics is "tested". There are no labs, no parallel universes. In the end we look at the data and either weave it into our established world philosophical view or take steps to avoid that.
There we go. Reaganomics. If we just keep applying them, no matter how bad things get, they will eventually work, right? We all just need to have faith. Where's that invisible hand when we need it?
You are expressing something closer to a religious faith tan anything connected to objective reality. The things you say are beliefs, contradicted by objective reality. We are living the consequences - the only possible consequences - of what you are promoting. You want us to debate whether or not your beliefs are "true." I am looking at results in the real world.
If what you were saying were true, then things could not possibly be as screwed up as they are. The objective reality contradicts and invalidates your convoluted and irrational faith-based ideas.
"There we go. Reaganomics."
Where? That you would just desperately pull that out of your ass all of a sudden tells me that you are being thrashed again. I was more impressed back when you pretended not to understand what I was saying. You seem to be having no problem at all today. I also like how you make many unsupported statements while accusing me of doing that. LOL!
"You are expressing something closer to a religious faith"
Right back at you. Politics and Economics and Philosophy are not hard science, and a bit of "faith" is to be expected. Look in the mirror. For example, one of your religious idols is "power imbalance". You see it where it is not there, and you shoehorn it into discussion points where you should be considering other factors.
"objective reality"
There can be no "objective reality" in a discussion of Politics and Economics and Philosophy.
"If what you were saying were true, then things could not possibly be as screwed up as they are."
Unsupported. I haven't even begun to talk about why things are screwed up, and to what degree this characterization is correct in the first place.
Zero. Of course. Do you seriously think that people making $20,000 should be taxed? Good grief.
The federal tax bill is around $1K, after the 20K of "Wages, salary, tips, and other compensation" gets knocked down to around 11K by the standard deduction, etc. Just so you know.
Oh, not only that, but at 4°C pure water has a density (weight or mass) of about 1 g/cu.cm.
Just so you know.
(As long as we are throwing non-sequitors around, I thought I would contribute to the effort.)
"non-sequitors"
Gesundheit. You don't know the real meaning of this term, do you? LOL!
"I would contribute to the effort"
LOL!
*I* was only trying to be helpful. We were talking *hypothetically* and now we know a *factual* estimate. That you would specifically take the time to make the above remarks after *I* actually moved the conversation forward with mine I take as a sign you are being "thrashed" again.
And what I said *does* "follow logically", you are welcome. LOL!
This is lovely. Poor rich people, they are being abused. Never mind that they "make", NOT EARN, over 90% of the total income in the U.S.
Then, by clever legalized FRAUD such as accounting deduction for "depreciation" of real property, which miraculously goes UP in market value, NOT DOWN, and "tax shelters", they end up paying LESS TAXES AS PERCENTAGE than any middle class hard-working person.
BTW, the wealthiest 400 people in the U.S. pay only about 16% of their NET TAXABLE INCOME in taxes, whereas the middle-class folks, who make about $100K and DO NOT own multiple real estate, pay the max tax of 35%.
10/25/10 In 2009, the richest 400 taxpayers in the U.S. paid ONLY 16.62% of their income in taxes, down from 26.8% in 1992:
http://www.michaelmoore.com/words/mike-friends-blog/socialism-rich-are-winning-us-class-war-facts-show-rich-getting-richer-everyone-else-poorer
Misleading and nonsensical.
Of course 1% of a $1,000,000 annual income - $10,000 - is "more" than 25% of a $30,000 annual income - $7,500. So what?
Oh, Horace you are on a roll today. You have done such a fine job here I have decided to dub thee "Horace, poker of hornets nets".
It's always nice to hear from you, NC-Tom.
The writer uses facts... in the form of you know, numbers that support his conclusions.
Those still grasping the idea that he's left out an important part of the story are using assertions without fact.
"The writer uses facts... "
But he also *guesses* how people will behave if changes are made. That's OK though, that's all anyone can do. But it's not only based on facts.
So can we assume that you are just fine with how the economy is going these days? Any useful suggestions on getting the debt down ? Have anything useful to contribute or are you just the devils advocate poking the progressives?
What do you believe jakenewton?
I'm honestly curious because you and Horace just seem to be privileged business school jerks.
The fact is that these very rich people are not dumb. They take some of their vast weatlh and buy the government. It is a very good and low price investment in the continuing growth of their wealth. You can easily buy a Congress man for as little as $800.00.
I live in the district of California that used to be represented by Tom Lantos. While he was in office, there was a concern that a certain weight loss pharmaceutical might be causing heart failure and death to the young women who took this medication. The facts were not all in, but a decison was made to put a warning label on the product. The pharmacuetical company made a 'donation' of under a thousand dollars to Congressman Lantos. This Congress Representative then spoke out against the warning label, claiming that this would harm the income of the drug company. The warning was not put on the product. Until a few more young women died and it was taken off the market.
The same purchasing of our elected officials goes on in the issues of peace and war, health care for all, tax breaks for the rich, bailout of the bankers and just about every issue that comes up before our Congress.
We got the best government that money can buy.
The -P.R.- problem with getting the 95% of us to demand the top 5%(rich) cough up is too many in the 95% think they are rich!
In illogic logic, people who know that heaven is myth embrace the lie , they even promote it. JUST IN CASE.
Our society also promotes Santa Claus.
I like the John McCain rule; the rich are those that are unsure how many houses they own, or where they spend Christmas.
The pundits have made it abundantly clear that we can't do anything about this huge disparity because we all aspire to be rich (and are stupid enough to think we will be).
You do have a point. Throughout history the so-called "lower classes" have nearly always aspired for the life of the "higher classes". Textbook example: the bourgeoisie of the 19th century.
Most people are aspiring to eat. Extensive work by Pew Research shows that for only about 10% of the population is getting wealthy a driving motivation. The bourgeoisie of the 19th century are with us today, and society and culture are organized around their needs and desires while the other 90% suffer and are deprived.
About 10% of the lower class (working class) are striving to become upper class, and it is from that group that the ruling class is derived. Yes, there are people at all levels who share that aspiration, and all social relations, conventions and institutions at all levels are dominated by them and by the mythology that supports their behavior - the belief that those with more wealth and access to resources have a "right" to control and dominate those with less, and that striving to amass wealth and gain control over resources is a desirable social trait that produces positive results.
Someone said that the only economist that predicted the recent economic crisis has the last name of Marx. Can we say "class war," boys and girls?
When President Obama was inaugurated his major task, as seen by himself, was to help save American capitalism by governmental actions. Hence "too big to fail" remained on the table, banks and corporations were bailed out, all in the name of preserving jobs. This is tinkering at the edges. The fundamental problems are left untouched. They are: stagnation of real incomes after 1970 (as pointed out by Professor Wolff), skyrocketing profits owing to continued increase of worker's productivity, and huge personal credit-card debts by the working class. The continued tax cut for the "rich" deprives the federal government of funds but it contributes nothing to alleviate the three fundamentals. In fact, given the current financial-economic carousel of our nation, the increase of taxes for the "rich" would have decreased the amount of funds available to loan to credit-card users which the "rich" would have otherwise deposited in banks. In other words: potentially bad for the middle class as well as for the "rich".
American capitalism "as we have known it" is tottering on a brink of continued disasters. It is a high wire act from which it almost fell into the abyss in 2008. To the best of my judgment, President Obama dues not have a clue of how to keep it on the wire much longer. In fact, it is not even in the hands of our Presidents. Only the entrepreneurs can save their system and they have seldom shown any aptitude to do so. My recommendation: your only chance is to use your profits for only two purposes: re-investment and increase of worker's salaries. From now on your personal income should never exceed $ 100,000 adjusted to inflation. Forever.
Our working class? As long as it believes in "American Exceptionalism",a.k.a. "The American Dream" the high wire act will continue. Every near-fall will impoverish the working class. The ultimate fall will drag the working class with it into the abyss, unless it wakes up in time that is to say stop swallowing the pablum thrown at it by politicians, employers, and essentially the entire mass media.
It's understanding the process that delivers wealth to the wealthy that's important. Production (P) is distributed to landholders as rent (R) to labor as wages (W), and to capital (I). P = R + W + I. If we capture for revenue what economists call the 'economic rent' from land and other natural resources (spectra, mining, fishing, forestry & aircarft slot licences), viz, P - R = W + I, labor and capital are not fined with taxes for producing. Taxes don't have to enter the production equation.
We've gradually wound back the public capture of economic rents since 1972, allowing the big boys to privatise it, so average real wages have declined by 17% since 1972 (according to US Dept of Labor time series data).
Unions are meant to be acting in the interest of workers, but still haven't discovered this process. Choke off effective demand of the workers, send them into debt while 1% feast on publicly-generated land and resource rents. Marvellous! That's how they got us by the short and curlies.
There's more about this at www.thedepression.org.au
Your formula for "Production" is NOT correct. Also, you DID NOT provide YOUR definition of "Production".
As far as I'm aware, in the years before Great Depression, "Production" of California orchards in the form of ripe oranges was ROTTING in orange piles of several tons each on the sides of the farm roads. Then it was sprayed with gasoline, so that little children, dying of hunger, those little sons and daughters of the farm workers who picked those oranges from the trees, could not steal and eat the perfectly ripe fruit.
Read John Steinbeck "The Grapes of Wrath".
In this case P=0, all production WAS DESTROYED by the owners of the farms, simply because it could not be sold for PROFIT.
And giving away ripe oranges WAS NOT something that psychopaths farm owners would do. They, naturally, preferred to see little children suffering from hunger and dying. Psychopaths ENJOY causing sufferings to other people. They feel POWER and perverted PLEASURE from doing so.
The same is happening in the U.S. today. In general, Capitalism PROMOTES PSYCHOPATHY, and the most clever and perverted non-violent psychopaths get the most rewards.
The world authority on psychopathy, Canadian researcher Dr. Robert Hare, said that the BEST place to find and study psychopaths is NY Stock Exchange.
So I suggest that you stop thinking of economy in formulas, and start thinking about psychology and neuro-science of social dominance. Here's the good start with lots of scientific research on the subject-
"How Psychopaths Destroy Humanity" at:
http://www.selfrepresentedfool.org/id81.html
BTW, today, about 35% of U.S. males and about 12% of U.S. females are likely psychopaths. If Capitalism continues as it is right now, in about 10-15 years, 75% of U.S. males and 25% of U.S. females will likely be psychopaths.
The U.S. will look like Haiti with the huge number of forced-labor prisons and a few nice gated communities for the top 1% of US Plutonomy.
No, the distributional formula IS quite correct, SRFool. [I can point you to where the Australian Treasury referred to it recently if you wish.]
P is product, production, or GDP - call it what you will.
We stuff the equation up by introducing taxation, when publicly-generated economic rent, equating to some 50% of the economy, would give us necessary government PLUS a decent citizens' dividend for everyone.
And the sociopaths who devise our revenue systems for the wealthy can match it with your psychopaths, SRFool.
See http://thedepression.org.au/?p=1969
Cheers.
Dump em all, let's go back to the barter system, then they can use their greenbacks for TP.