A cynic might argue that business leaders and their friends in Congress weren't expecting different results.
In either case, we've become a bipolar nation, 1% manic and 99% depressive. Our affliction is caused by a 30-year experiment in the dismal economics of delusion. Deregulation for corporations and tax cuts for the wealthy have defined conservative policy since the 1970s, when University of Chicago economist Arthur Laffer convinced Dick Cheney and other Republican officials that lowering taxes on the rich would generate more revenue.
Ronald Reagan complied in the 1980s by dramatically reducing the top marginal tax rate. And while declaring government "the problem" he eased a half-century of protective regulations on mortgage lending.
In the Clinton years, Larry Summers and Alan Greenspan and Phil Gramm and others lobbied against regulations on the derivatives that evolved into toxic assets a decade later. A lonely voice of opposition, Commodities Trading Commission head Brooksley Born, was denounced by the powerful Treasury men, who were shocked by her affront to the nation's "financial stability."
The repeal of the Glass-Steagall Act in 1999 removed long-held protections for commercial bank deposits, as the newly liberated financial institutions now coveted the unprecedented profits in high-risk investments. Soon after, the 2000s brought us the Bush tax cuts, which have cost the nation over two trillion dollars, and a further assault on the Securities and Exchange Commission by Goldman Sachs and other financial institutions committed to "self-regulation."
So what's the result of all this? The financial collapse of 2008, of course. But it goes way beyond that. Tax cuts and deregulation led to the worst inequality since the Great Depression, with the top 1% nearly tripling their income while wages leveled off. The richest 10% own 80% of the "unearned income" that gets taxed at rates lower than those for teachers or health care workers. Corporate profits are at a record high, having accounted for 88% of the recovery after the 2008-9 recession.
Yet taxes on corporate income have been shrinking dramatically. The total tax revenue derived from corporate taxes has dropped from about 20% in the 1960s to under 9% in 2010. From 2008 to 2010, the top 100 U.S. corporations paid only 12.2% of their income in taxes, and thirty of them paid nothing at all.
The lack of SEC regulation has also allowed corporate America to seek tax dodges beyond our borders. Citizens for Tax Justice reports that the 280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010. The "Ugland House," a single building in the Cayman Islands, is now the 'home' of 18,857 corporations. While the worldwide average corporate profit per employee is $40,000, in Bermuda in 2007 it was $5.4 million per employee.
But corporate heads, especially in the financial sector, keep lobbying for more deregulation, often infiltrating the regulatory agencies with former employees to get their point across. The Washington Post reported on the clamor by business leaders to link regulations to job losses. Congress listens. "Dodd-Frank obviously is a disaster," proclaimed Ron Paul. "But Sarbanes-Oxley costs a trillion dollars, too. Let's repeal that, too!"
Ironically, even earnest attempts at regulation can be foiled by big business. The Daily notes that "Stringent regulations tend to protect incumbent firms from...innovative start-ups that could drive them out of business...Google, Apple and other technology giants, for example, have spent billions of dollars on software patents to defend themselves against pointless litigation. Shoestring entrepreneurs can't even begin to do the same, so many new tech firms are never established."
We don't have the political will to regulate greed in a reasonable and effective manner. Instead, wealthy Americans continue to insist that more for them is better for everyone, and that the system will work if we just leave it alone. As Rachel Marsden said, "If capitalism is perceived to not be working in America...it's because the system isn't capitalist enough."
After 30 years of economic devastation for most Americans, it's sad to watch our rapid fall from sanity.