Nel's New Day

December 14, 2011

Income Inequity Destroys Economy

Class warfare: that’s what Republicans call it. They want everyone to stop walking about the inequity of income between the bottom 99 percent and the rest of the people in the country. Income inequity is so prevalent, however, that seeing it cannot be avoided.

David Siegel tried to sell his unfinished 90,000-square-foot house (no, that’s not a typo!) in Orlando. The asking price of $75 million may include the 10 Segways that he, wife Jacqueline, and their eight children use to get from one part of the house to another. The 10 of them will not be homeless; Siegel still owns the 26,000-square-foot house where they live. The last recession hit Siegel hard: his time-share company, Westgate Resorts, went from an annual $200 million profit to $1 billion in the hole. His money difficulties, he explained, stemmed from his banks that won’t finance loans.

The recession hurt others as well. Edra Blixseth, former co-owner of the Yellowstone Club in Big Sky (MT), filed for Chapter 7 bankruptcy. She said that she and husband Tim were “living on the financial edge,” edge meaning two yachts, three jets, and a California estate with its own 19-hole golf course and staff of 110 people. Their spending is in accord with the patterns of the top 10 percent that spends 10 times the amount that the bottom 80 percent do. We’ll guess that the bottom 80 percent are more concerned with toothpaste and milk whereas the top end concentrates on jewelry and vacations.

When Westgate couldn’t roll over its debts, Siegel fired half of his workforce of 12,000 people and sold off assets. Today, according to Siegel, Westgate is “highly profitable,” but revenues are still half their peak levels. Economy measures for the Siegel means that they fired 14 of their 15 housekeepers and lost their private chef, “Chef Jeff.” The kids go to public school, and the bank seized their Gulfstream. The family is allowed to use it occasionally, but on a trip when they had to fly commercially, one of the kids said, “Mom, what are all these strangers doing on our plane?” [Thanks to Robert Frank for this information in his book, The High-Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble, and Bust.]

Conservatives are fond of raging about how little the bottom half of the people in the nation. They like to say that these people pay nothing, but they neglect the fact that any employed person in the United States pays payroll taxes. It should be a no-brainer to understand why the unemployed don’t pay taxes.

The top 1% of earners pay 38% of federal income taxes. They also have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. In summary 10% of the people pretty much own the United States of America.

Other income inequities:

The top 0.1 percent of earners in the U.S., about 328,000 people, has more than 20 percent of the personal income in the country, and their average income is $5.4 million. The average income of the bottom 90 percent is $31,244.

In 1970 the top 100 CEOs earned $45 for every $1 earned by the average worker; in 2006, the ratio was $1,723 to $1.

In 2005 total reported income in the United States increased almost 9 percent from the year before; income for those in the bottom 90 percent dipped slightly compared with the year before, dropping $172, or 0.6 percent. The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000, or about 14 percent.

The top 300,000 people in the U.S. (about 0.1 percent) collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980. The top 10 percent of  people in the U.S. collected 48.5 percent of all reported income in 2005, an increase of more than 2 percent over the previous year and up from roughly 33 percent in the late 1970s, about a 50 percent increase.

The combined net worth of the bottom 40 percent of the nation’s wealth  is 0.3 percent or the country’s total net worth; the top 1 percent has 25 percent or the nation’s wealth, about the same as just before the Great Depression in the 1930s.

S. Robson “Rob” Walton, Walmart chairman and 9th richest person in this country, has a net worth of about $19.7 billion. Walmart workers make around $8.75 an hour, about $18,000 a year. Each one of these employees would have to work over a million years to approach the $19.7 billion. Alice and Jim Walton each have about $20 billion, and Christy Walton has $24 billion. In 2010 the CEO of Walmart, Michael Duke, made his average employee’s yearly salary, $18,000, every hour.

Six members of the Walton family possess wealth equal to that of the entire bottom 30 percent of Americans: six people have the same wealth as over 90 million people in this country.

In the 1950s the top 400 taxpayers faced a 90 percent federal tax rate; by 1995 their effective tax rate, what they really paid after all deductions as a percent of all their income, fell to 30 percent. Now it’s barely 16 percent.

In 2010 business donated $1,317,999,729 to political campaigns; labor donated $92,355,686. Such an inequity in campaign expenditures guarantees increase income inequity.

In 1994 the top six banks’s assets were 17 percent of the economy; in 2009 the top six banks’ assets were 63 percent of the economy.

Between 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the 1 percent of the population with the highest income; their share of after-tax income more than doubled from below 8 percent in 1979 to 17 percent in 2007. For those in the top 20 percent of the population, average real after-tax household income grew by 65 percent, increasing their overall share from 43 percent in 1979 to 53 percent.

For the poorest fifth of the population, average real after-tax household income rose 18 percent between 1979 to 2007, lowering their percent of after-tax household income from 7 percent in 1979 to 5 percent in 2007. And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40 percent, dropping their share of after-tax income by 2-3 percent from 1979 to 2007. Thus the lowest 80 percent almost kept up with inflation during these 28 years, but the collective income of the top 20 percent is now more than the bottom 80 percent.

The U.S. has a higher level of income inequality than Europe, Canada, Australia, and South Korea, according to data gathered by the World Bank. America ranks in the bottom third of the list of 90 countries, which is mainly based on 2008 data of per capita income or consumption in each nation.

Unique to the United States is the relative lack of government support compared to Europe and Canada. Other countries provide more public services, including health insurance, higher education, daycare, and pensions. And these benefits are provided on a more universal basis, rather than being dependent on one’s income level, as in the United States.

Europe also places more restraints on executive compensation so its corporate leaders don’t receive the outsized packages that their American counterparts do. Lavish executive pay is one reason why the top 1% ofU.S. earners have seen their average inflation-adjusted household incomes rise by 275%, according to the Congressional Budget Office.

At the same time, weakening the unions has destroyed the middle class. The conservatives’ philosophy that income inequity is good because it shows the success of capitalism makes them fail to recognize that without a strong middle class, the bottom 99 percent cannot afford to spend money to support the private sector. The result is fewer and fewer jobs, continually weakening the private sector and keeping them from supporting the public sector. The Republican position is forcing the United States into a race to the bottom of the world’s economy.

December 10, 2011

Luntz Teach Republicans Governors ‘Language’

At the Republican Governor’s Association conference in Florida this past week, featured pollster Frank Luntz gave a session about how they could control the public by their “communication.” Yahoo! News’ Chris Moody passed along a few of Luntz’s tips to manage the problems that Occupy Wall Street has brought to the party. Sort of a Control OWS for Dummies to keep them voting to send money to the wealthy.

Luntz began by explaining that he’s “scared of this anti-Wall Street effort.” He said, ” I’m frightened to death” because this movement is “having an impact on what the American people think of capitalism.”

–        Don’t Mention Capitalism: “The public…still prefers capitalism to socialism, but they think capitalism is immoral. And if we’re seen as defenders of quote, Wall Street, end quote, we’ve got a problem.”

–        Empathize with the 99 Percent Protesters: Conservatives should tell protesters that they “get it”: “First off, here are three words for you all: ‘I get it.’ … ‘I get that you’re. I get that you’ve seen inequality. I get that you want to fix the system.” [Cantor started that months ago just before he explained to them that they could get more money if they just worked harder.]

–        Don’t Say Bonus: Republicans should re-frame the concept of the bonus payment–which bailed-out Wall Street doles out to its employees during holidays–as “pay for performance” instead. “If you give out a bonus at a time of financial hardship, you’re going to make people angry,” Luntz said.

–        Don’t Mention the Middle Class Because Americans Don’t Trust Republicans to Defend It: “They cannot win if the fight is on hardworking taxpayers,” Luntz told his audience. “We can say we defend the ‘middle class’ and the public will say, I’m not sure about that. But defending ‘hardworking taxpayers’ and Republicans have the advantage.”

–        Don’t Talk about Taxing the Rich: People in theUnited States want to tax the rich, so Republicans should say that the government “takes from the rich.”

Luntz also suggests using the term “careers” for “jobs” because it makes “work” look less onerous to young people. With corporations downgrading positions from professional careers and more toward “positions” requiring minimal ability accompanied by minimal pay and benefits, Republicans know that “careers” are become less and less of a possibility. But they don’t care.

In warning his audience not to use the term “sacrifice,” Luntz knows that people are tired of austerity. Again his suggestion about “talking about how ‘we’re all in this together’; we either succeed together or we fail together” is not true. Republicans know that the bottom 99 percent is not equal to the top 1 percent. Again they don’t are.

Frank Luntz is considered to be one of the top political communications experts in the world, providing consulting to many of the world’s top corporations, politicians, and special interest groups. If Luntz—and the Republicans—are concerned, the Occupy Movement is making a difference.

Rather than being sincere, however, Luntz is using Republicans to make money. When he says he is “scared to death,” he knows the Republicans who hire him are scared to death and will pay him to offer them language to fight against the Occupiers. He knows that Republicans define “democracy” as the freedom to seek one’s self-interest and ignore what is good for other Americans and others in the world. That perspective is important to support the greed of Wall Street in opposition to a market for all that would maximize the well-being of most people.

In the Republican hierarchical view of society, success is always deserved and lack of success is a moral failure of people who won’t work. Thus Luntz warned the Republicans to avoid the fact that the 99 percent are the hard workers, and the top 1 percent are the managers.

Some hints for Democrats. Avoid the word tax; use “revenue” instead. Tax means taking from hardworking people; revenue means money needed for any institution to function and flourish. Keep pointing out that corporations govern people’s lives far more than any government does and for their personal profit.  Luntz—and Republicans—want to avoid discussion of corporate and military waste, which is huge. Any discussion of outsourcing and minimizing pay for work, which leads corporations to eliminate or downgrade jobs and hence keep wages low when profits are high is damaging to Republicans.

Progressives need to use Luntz’s lessons and express a view of a moral Democracy. This would include a robust Public necessary for private success and health, a Market for All, regulation as protection, corporations that keep wages low when profits are high, the manner in which most of the rich earn much of their money without making anything or serving anyone, corporations governing lives for their profit, corporate and military waste, the moral and social role of unions, and global warming causing the increasingly monstrous effects of weather disasters. And much much more. No more bashing—present the dream.

Luntz told the Republican governors to tell the protesters: “You shouldn’t be occupying Wall Street, you should be occupying Washington. You should occupy the White House because it’s the policies over the past few years that have created this problem.” Fortunately, the Occupiers are savvy: they’re doing both.

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