Nel's New Day

September 17, 2013

U.S. on Constitution Day 2013

Today is Constitution Day. Although the U.S. Constitution is 226 years old today, the day recognizing its adoption is only nine days. Sen. Robert Byrd’s amendment to the Omnibus spending bill mandates that every educational institution receiving federal funding must provide educational programming on the document’s history on that day. There are many events around the country. My favorite is the flying of the hemp flag over the Vermont statehouse. Vermont is one of nine states legalizing hemp production, against federal policy because it contains trace amounts of THC, the psychoactive ingredient found in marijuana. 

Constitution Day is the day:

  • After another mass shooting, this one killing 13 people just a few miles from the Capitol because those who read the Second Amendment are convinced that it has nothing to do with a militia and everything to do with everyone having the right to own as many guns, including those who are blind and mentally unbalanced.
  • After Brazil’s President Dilma Rousseff dropped a state visit to the United States because the National Security Agency is spying on other governments as well as all the citizens of the United States.
  • When House Speaker John Boehner (R-OH) says he intends take a bill to the House that will create a fiscal crisis by shutting down the government.
  • Following the push to cause another preemptive war by bombing Syria on intelligence that could, like in the case of Iran, be inaccurate.

Because of the Civil War, the 14th and 15th Amendments made an attempt to provide an inclusive nation. Almost 150 years after these amendments were passed in Congress and ratified by the states, bigoted people in the United States protested Miss New York, Nina Davuluri, becoming Miss America. This is a sample of tweets about the Syracuse native of Indian descent:

“Well they just picked a Muslim for Miss America. That must’ve made Obama happy. Maybe he had a vote.”

“I am literally soo mad right now a ARAB [sic] won.”

Miss-Syracuse-NY-Nina-Davuliri

Fox News Radio host Todd Starnes said that Davuluri doesn’t “represent American values.” On his Facebook page, Starnes wrote that Miss Kansas, Theresa Vail, lost because “the liberal Miss America judges were not interested in a gun-toting, deer-hunting, military veteran.”

On this Constitution Day, the gulf between the richest 1 percent and the remaining 99 percent became the widest since before the stock market crash in 1929 caused the Great Depression.  According to a report released last week, the wealthiest people in the U.S. earned more than 19 percent of last year’s household income. In contrast, income for the remaining 99 percent went up 1 percent. The top 1 percent benefitted from 95 percent of income gains from rising corporate profits and stock prices.

That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession. The top 20 percent got a record 48.2 percent of total earnings in 2012.

The top 1 percent of American households had pretax income above $394,000 last year. The top 10 percent had income exceeding $114,000. More than 44 percent of the people in the nation have salaries under $30,000. Severe inequities have only increased during the past three decades because wages remained flat for the time for the bottom 90 percent of workers.

The free-market mentality has led to this disaster. These false conclusions of free-market anti-regulation libertarians continue to provide the top 1 percent with an even greater share of the country’s assets.

A Free Market is Good for Everyone. Milton Friedman said, “The free market system distributes the fruits of economic progress among all people.” At least 90 percent of the people in the United States probably won’t agree with Friedman that they are getting a fair share of the “fruits.”

The Market Works. It Just Doesn’t Feel Like It. The Wall Street Journal wrote, “Middle-class Americans have more buying power than ever before.” At the same time, their own writer reported that “the middle class…has shrunk considerably over the past few decades.” The Economist tried to persuade its readers that blacks are much better off today than in the 1960s because of their low salaries. In actuality, median wealth in 2009 for black families was $5,677 compared to $113, 149 for white families.

Why Can’t You Be a Successful Individual Like Me?  A Wall Street Journal writer claims, “The American dream has traditionally been one of individual success that is rewarded and admired.” The richest 10% own almost 90 percent of stocks excluding pensions, and the stock market has historically risen three times faster than the GDP itself. The top 10 percent makes its money by just living from one day to the next. Although CEOs, upper management, and financial professionals compose 60 percent of the richest 0.1 percent of people in the U.S., only 3 percent of them were entrepreneurs in 2005. More than 99 percent of all entrepreneurs come from the rapidly shrinking middle class.

If You’re Not a Successful Individual, You Must Be Lazy. A new myth promulgated by the Cato Institute will soon be sweeping the country. The claim is that “welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour.” Both the Economic Policy Institute and the Center on Budget and Policy Priorities discredit the claim. Many employed families don’t make enough money to survive; over 83 percent of all benefits going to low-income people are for the elderly, the disabled, or working households. 

If I Accomplish Everything on My Own, Why Should I Pay Taxes? Through convoluted—and fake—reasoning, the Wall Street Journal purports that lower capital gains tax rate requires higher-income taxpayers to pay more taxes. Sort of like a lowered salary gives people more take-home pay. The Journal also calls the Financial Transaction Tax, .03 percent paid on each financial transaction, is a “sin tax” that will “punish sinners” to raise revenue for the U.S. Treasury. At this time, Wall Street traders bet thousands of times a second for free, risking the market through rapid-fire “flash trading” that make trades through computer algorithms. Traders pay zero taxes to destabilize the economy. An ordinary person with a 401(k) would pay about $1 a year for such a tax, but the FTT would raise between $700 billion and $1.2 trillion over ten years to create jobs and protect important programs.

Meanwhile, the people who want to close down the government also want to cut food stamps from 3.8 million people and give the money to oil companies and other corporations, sending more money to the richest 1 percent.

Today is Constitution Day. The Preamble to the U.S. Constitution reads:

“We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

Let’s work to “promote the general Welfare.”

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.

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