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.