Apr 272010
Fuckin' taxes
Image by blmurch via Flickr

Distribution of earnings is drastically skewed toward the very top, but regardless, with a GDP that’s grown 14 times larger since 1970, at least our nation must be doing well as a whole — right? Well . . . not so quick.

While the very rich have taken a constantly growing portion of the national pie, the same fallacious neoclassical economic policy that started the drain has steadily reduced their tax burden. American infrastructure is falling apart; manufacturing has all but vanished; jobs have disappeared overseas, and average wages are becoming increasingly depressed. The federal government has tried to address some of these issues, but with a debt currently pushing $13 trillion, Americans are ill at ease with more government spending. But, the bottom line is that the federal government has not the revenue to do anything without further increasing the debt.

Again, the problem isn’t lack of American productivity. The problem is a broken social contract with the American people. Our system is a democratic form of capitalism. Capitalism stresses the virtue of the free market and brings us more value and lower prices as consumers, along with higher returns as investors. American market economics have thrived for the past several decades. This is evidenced in our GDP. But what sets America apart is not our capitalism — China is now a capitalist society. The American difference is our democracy. But sadly, while our free market is triumphant, our democracy is in shambles.

Nobody wants to see their hard-earned money siphoned away in the form of taxes, but we all must do our part to help fund the shared services that government provides. This burden was once metered out in accordance with the degree to which benefit was gained from the economy. Our progressive income tax system is predicated on the idea that the more an individual earns, the more benefit they extract from the system, and the better their capacity to chip in with taxes. The concept was to fund needed governmental services while mitigating the impact on the average American’s ability to acquire the basic necessities of life. In order to achieve this, tax tables were designed to take a minimum from the earnings needed for essentials, and a progressively larger chunk as discretionary income grew.

Under Republican President, Dwight D. Eisenhower, the top marginal tax bracket was set at 91 percent. Under President John F. Kennedy, the top rate was cut to 70 percent. That rate remained relatively constant until 1980 and the birth of Reaganomics. Since then it’s been cut in half to 35 percent. There’s no mystery who benefitted from these changes, but the story doesn’t end there. Equally troubling as the top rate is the threshold at which it takes effect. Since 1942, that point has ranged between $200 thousand and $400 thousand. But it wasn’t always such. From 1936 until 1942, the threshold for the top bracket was $5 million, which equates to around $75 million in today’s dollars. In 1941, the associated tax rate for that top bracket was 81.1 percent. For 2010, the top rate kicks in at $373,650 and the 35 percent applies to all incomes above that point.

The progressive structure was intended to ensure that everyone pays the same percentage of earnings up to each stepped threshold. Those folk who paid 81.1 percent in 1941 did so only on the portion of their earnings over $5 million. Today, a person earning $50,000 would have their earnings above $34,000 taxed at 25 percent. Another taxpayer who earns $250,000 would find their top marginal rate to be 33 percent. In this example, the higher income individual makes 5 times the earnings and pays an additional 8 percent at their highest step. Does this sound fair to you? It does to me, and I’ve spent most of my adult life as the guy paying the larger chunk. What bothers me is that the equity of this example is soon lost when the truly rich enter the picture. You have to ask yourself, what possible rationale is there for the person earning 5 times more again, or $1.25 million, only paying an additional 2 percent? Why do the progressive steps end where they do?

The answer is simple — there is no legitimate rationale; there’s only a failure of our political system to serve The People. Our government has been bought by the rich, and our media is owned by them. They’ve managed to play on middle-class fears and cast “redistribution of wealth” as a negative term that evokes visions of hard-earned dollars becoming handouts to the needy (or as more often portrayed — the lazy). This diversion has drawn attention while the real redistribution of wealth was occurring right under our noses. Their misdirection has been extremely successful. They managed to effectively redistribute the wealth directly to themselves, and they did so at the expense of the middle class.

It’s time for the heart of America to open their eyes and stop believing the lies perpetrated on us by the new American royalty. Trickle-down was a fallacy, and Reaganomics an unmitigated disaster for the average American. The policies of the past 30 years have done nothing but serve the rich and further widen the gap between the haves and have-nots. The call for small government is nothing more than code talk for capitalism over democracy and further deterioration of the middle class. We don’t need small government; we need effective, right-sized government. We need jobs and education and sound energy policy. We need infrastructure, emergency services, healthcare, security . . . and we need the tax revenues to pay for them without piling on more debt.

It time we wake up. We’ve been sold a bad bill of goods. The American dream is being stolen, and it isn’t by the poor. The thieves are the very rich, and they want us distracted. We must stop buying their diversion and keep our eye on the ball. We can no longer afford to allow ourselves to be taken in by sound bites and talking points. Instead, we must seek the facts and make up our own minds.

We are The People, and it’s up to Us to save America.

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Apr 262010
Inflation adjusted percentage increase in mean...
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Is your American dream still alive and thriving? Do you feel you’re economically better off now than you were ten years ago? Twenty years ago? Thirty? Unless you’re a member of the new America Royalty, your answer is likely a resounding. “No.”

When stagflation struck the American economy in the mid-1970s, it paved the way for the biggest lie ever to be swallowed by the American public — Reaganomics. The response to what was seen as ineffective government was to cut taxes and deregulate markets and industries. The general notion was one of market supremacy: if we could only get government out of the way, business would flourish and everyone would benefit; the rich would reap their bounty, invest their profits, and through the wonder of the “trickle-down” effect, jobs would be created, opportunity would expand and all would prosper.

It was the Glimmer Man himself, Ronald Reagan, who sold America on this dream. But as it turns out, his economic leadership was no better than most of his movies — that is, unless you were one of the wealthy. The sad truth is that instead of “trickle-down,” what we got was more like “leak-away.” The rich did reap their bounty, and they paid far less taxes on it, but instead of using the profits to create more American jobs, they sent those jobs overseas. The results is that average Americans have benefited in the form of lower consumer prices, but without jobs and fair pay, does that really matter?

The fact is that only the very rich have prospered from the market idolatry that began in the 1980s. The situation has become so bad, that shortly before the crash of 2007, an important milestone was reached: for the first time ever, the top 1 percent of Americans made more than a thousand times that of the average family in the bottom 90 percent. That same group now holds more wealth ($3.3 trillion or 33.8 percent) than the bottom 90 percent (28.5 percent). And making matters worse, the Federal Reserve analysis that provided these numbers excludes the wealth of the Forbes Top 400 wealthiest people — a group with $1.3 trillion in wealth, more than the bottom 50 percent of Americans.

Unless you are a member of the richest 1 percent, these numbers should cause you great alarm. The slide in prosperity for most Americans has nothing to do with intrinsic values.  In spite of the reverence bestowed upon President Ronald Reagan by middle-class conservatives across the nation, it was his economic policies that spring-boarded the great rape of the American middle class. Make no mistake about it, the disparity in wealth and income that’s occurred since the mid-1970s is the direct result of public policy and political decisions.

The situation has become so skewed in favor of the rich that the gap between classes actually widened during the period since 1973, even though the output of the average American worker rose almost 50 percent. The rewards from that gain in productivity were hoarded by America’s elite. If the average American worker had been allowed to share in the gain, their 2006 income would have been a cool $20,000 higher than it actually was. Need I tell you where that money went instead?

This problem is rampant, and left unchecked, threatens to destroy our country. The central concept behind capitalism is that all participants are motivated to work hard and share in the wealth. But when the system stacks gains so far in favor of the ruling class, this motivation is diluted. We are living in the midst of a socially engineered inequality resulting from the greatest transference of wealth in our country’s history. And the most insidious aspect of the program is that, while many would have the average American fear that their hard earned money will be redistributed to the poor, it’s really being funneled directly to the very top.

If you only remember one thing from this article, let it be this: the economic policies of the past few decades have achieved their predictable result and brought the Gross Domestic Product (GDP) to new heights; during the period from 1973 to 2006, the GDP actually tripled in size, adjusted for inflation, but during that same period of time, our median household income has remained completely stagnant. In fact, even the incomes of people in the ninety-fifth percentile rose less than 1 percent a year between 1978 and 2004. Meanwhile, America’s top 1 percent received a 16 percent share of the total income in 2004 — double their 1980 cut of 8 percent. No matter how you cut it, the deck has been stacked, and the very rich are drawing all the aces.

Of course, much of the top’s massive income does stem from investment, but that doesn’t tell the whole story. I’m a firm supporter of different pay for different work, and I believe that CEOs who lead large corporations are entitled to substantial paychecks. But are current ratios really healthy? Can a nation where CEO salaries skyrocketed from 24-to-1 in 1965 to a 2004 ratio of 431-to-1 continue to prosper? Even at the post banking-crash ratio of 319-to-1 in 2008, the disparity is an affront to the concept of ethical compensation. If, as even “the founder of free market economics,” Adam Smith concluded, whatever’s good for the majority must be good policy, then this growing gap in pay is a deadly poison pill.

As detrimental as the executive pay gap may be, it’s really a relatively small part of the larger problem. The top 500 CEOs, with average salaries down to $9.25 million in 2009, aren’t even close to being the big money earners. No, that distinction belongs to a group of individuals who make nothing at all . . . except for money. Top honors go to the new kings of Wall Street, the captains of gambling on mortgages and pension funds. The top 25 hedge fund managers averaged a nice take — in excess of $1 billion each in 2009. The king of the street, David Tepper, actually pocketed $4 billion for himself. These individuals are reflective of a system that has lost its way. They are financial predators of the first order, with no regard for America or the American people. They create nothing. They just exploit financial rules and legalities in order to concentrate wealth — and they manage to achieve this while shifting all of the risk to others. Clever? Yes. Healthy for our nation? Well . . . you decide.

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Apr 242010

It’s looking increasingly likely that a moderately helpful financial reform bill to address some of the problems of the banking system that led to the financial crisis and the bailouts will pass Congress and be signed by President Obama.

The biggest problem is that it may be Too Weak to Succeed by allowing the megabanks to remain Too Big to Fail, thus insuring that the next cycle of boom, bust and bailout remains baked into the system.

Miles Mogulescu, Entertainment attorney, writer, and political activist

I am absolutely in favor of the Safe Banking Act and appreciate the fact that we still have elected officials like Senators Brown and Kaufman. It’s good to see that there are still members of Congress who have the conviction and courage to stand against the mammoth bank lobby.Anyone who’s alive and capable of coherent thought knows that we need serious reform of big banking in the United States. The Dodd bill, which is now moving before Congress, has some sound measures which will advance that cause, but it also has serious weaknesses. One important failure of Senator Dodd’s bill is the fact that it does little to address “Too Big to Fail,” which is at heart the reason for the bill in the first place.

The legislation proposed by Senators Brown and Kaufman goes straight to the heart of the matter. It deals directly with the fact that, where 15 years ago the 6 largest U.S. banks held assets totaling 17% of the Gross Domestic Product (GDP), they now hold 60% . This single point is by definition the essence of “To Big to Fail” (TBTF). The Safe Banking Act addresses this issue by limiting the size of any single bank to 3% of the GDP.

Of course, there’s no way the big banks want to see this happen. They spend a pile of money trying to ensure that Congress meets their needs — over $20 million between the securities/investment and commercial banking industries thus far in the 2009/2010 election cycle. Together, their spending is second only to lawyers and law firms.

Make no mistake about it, Senator Dodd is big-banking’s number one guy, and his bill caters to the banks by administering just enough regulation to give the appearance of reform without really impacting bank profitability. With the Safe Banking Act pending, we’ll now see much more Republican support for the Dodd bill. They will likely assemble a bipartisan effort to further weaken the bill, push it through and preempt the real reform in the Safe Banking Act.

This does not serve The People. We need to wake up and let our voices be heard. The Safe Banking Act will address TBTF with a hard cap on bank size. It will also help ensure that banks remain solvent by establishing more reasonable leverage ratios, raising the bar from 30:1 to 16:1.  These changes are essential to real reform, but they are unlikely to see the light of day in Congress unless We the People apply the pressure.

If you want to see an end to rampant bank greed and investment banking fat-cats stuffing their pockets at the expense of the common taxpayer, then please exercise your rights and go here to sign the petition. I’ve already signed it. I will be calling my senators; I’m posting this article on my blog, and I will inform everyone I know about this important legislation.

Don’t remain a pawn. Together we can make a difference.

Read the Article at HuffingtonPost

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