After a brief hiatus that included a Caribbean cruise, I return to the blog writing on a common theme – income disparity in America.
Since I’ve written last, Occupy Wall Street and the 99ers have dominated the news as well as the inevitable conservative backlash spurred by filmmaker Michael Wilson and the 53 percenters.
Here’s the thing that cracks me up – I’m a 99 percenter by definition; I’m a 53 percenter by definition; but I’m also a 20 percenter. What’s that? A 20 percenter? Yes, a 20 percenter – that part of the population that has done well in the economy – although nowhere near as well as the top 1%. This is the segment of the economy that has continued to see rising incomes and has disposable money.
“According to Gallup, from May 2009 to May 2011, daily consumer spending rose by 16 percent among Americans earning more than $90,000 a year; among all other Americans, spending was completely flat. The consumer recovery, such as it is, appears to be driven by the affluent, not by the masses. Three years after the crash of 2008, the rich and well educated are putting the recession behind them. The rest of America is stuck in neutral or reverse.” Link
I’m not hurting in this economy. My home was purchased 16 years ago and I have a fixed rate mortgage within my means to make. If it weren’t for putting three children through college at the same time, I might actually be further ahead than I am. So, you may ask, why is it that I care one iota about the 99 percenters and why am I constantly in debates with conservative friends on the direction of the future of this country?
It pains me – literally pains me – that I have friends that have their heads so twisted to the right that they are blinded to the dangers immediately in front of them. They willingly swallow the right’s dogma hook line and sinker and believe wholeheartedly that anything that doesn’t reinforce their world-view is “leftist/liberal/socialist” rhetoric designed to destroy this country.
One friend rhetorically asks his Facebook friends why his success is a threat to others. Another friend feels that I should be ashamed for my self-described centrist moniker. My blog was intended as an effort to sit them down and try to rationally address to them in a way to help them understand that the issues in front of us are bigger than the 10 second GOP soundbite or the 30 minutes they spend nodding their heads to Sean Hannity or Bill O’Rielly.
Here’s an example – one friend believes that Herman Cain is the new American savoir and his 9-9-9 tax plan is manna from heaven and the key to our country’s future prosperity. As an aforementioned 20 percenter, I stand to benefit greatly from Cain’s tax plan. Chances are, if enacted, I’d have a few extra thousand dollars at the end of the year to invest, travel to Europe on, or just buy junk that I want. But what of the 80 percenters (those unlucky enough – or too lazy – to be in the 20 percent club)?
Cain, in his television appearances, glosses over such details. “The fact that we are taking out embedded taxes that are built into all of the goods and services in this country, prices will not go up,” he asserted on MSNBC. “They will not go up.” He then gave an example of a family of four earning $50,000.
“Today, under the current system, they will pay over $10,000 in taxes assuming standard deductions and standard exemptions. I’ve gone through the math, $10,000. Now, with 9-9-9, they’re going to pay that 9 percent personal — that 9 percent tax on their income. So that’s only $4,500. They still have $5,500 left over to apply to this sales tax piece. …They are still going to have money left over.”
We’re not sure how Cain calculates that this family now pays $10,000 in taxes, but the reliable Tax Foundation calculator comes up with a much more reasonable figure: a total tax bill of $3,515 — $690 in federal income taxes and $2,825 in payroll taxes. (The family gets a big income-tax savings from the child tax credit, which Cain would eliminate.)
So, in other words, under Cain’s plan, this family would instantly pay $1,000 more in income taxes. They would also pay additional sales taxes, probably more than $3,000, on their purchases. It’s unclear how the business tax would affect the family’s tax bill but it appears this theoretical family would get no tax cut but instead a 100 percent tax increase.
(The picture changes somewhat if you assume that all the employer-paid payroll taxes automatically would revert to the employee. We’re not sure that’s a good bet given the design of Cain’s business tax, but pro-Cain advocates make that assumption with their own tax calculator. But even under this scenario, the family appears stuck with at least a $2,000 tax increase.) Link
Or from the Atlantic:
If you live and work in the professional communities of Boston or Seattle or Washington, D.C., it is easy to forget that nationwide, even among people ages 25 to 34, college graduates make up only about 30 percent of the population. And it is easy to forget that a family income of $113,000 in 2009 would have put you in the 80th income percentile nationally. The true center of American society has always been its nonprofessionals—high-school graduates who didn’t go on to get a bachelor’s degree make up 58 percent of the adult population. And as manufacturing jobs and semiskilled office positions disappear, much of this vast, nonprofessional middle class is drifting downward. Link
The resentment behind the OWS movement is the inability to effectively participate in an economy that little values merit, hard work, or industry. Our 53 percenters view them as leftists just wanting another handout and wealth redistribution, which is somewhat ironic given the Tea Party signs in 2008-9 asking for the same during the government bailout of the financial sector. It’s amusing, albeit serious, that the 53 percenters seem to think that their success (perceived or real) is threatening to anyone in the OWS. There is a gulf of difference between people that create wealth based on capitalist models of supply and demand. I’ve never heard anyone suggest that Bill Gates, Mark Zuckerburg, or the late Steve Jobs are not deserving of the profits they’ve made. These people operated successful businesses that met a demand for their product. OWS is protesting a sector of the economy that creates nothing but profit based on the movement of money – soundly or unsoundly. That the financial collapse of 2008 happened based on little more than Wall Street greed and lust for ever-increasing profits, not only with the government there to bailout the majority of the sector (after Lehman), but moreover, with no effective governance or oversight to insure this “blip” does not occur again is at the heart of the protest.
These were the very elements of disaffection that began the Tea Party movement – with only a couple minor differences. One, the OWS protestors are painted as liberals and therefore a threat to conservatism by definition; and two, these protestors are not just complaining about a handout they were never given or demanding the government take less of their hard-earned money – they are seeking justice for egregiousness acts that go beyond the pale.
The beauty of this country lies in our ability to wrap ourselves up warmly in blissful ignorance, free from facts. Ask an American, any American, to which class they belong and the vast majority will respond with “middle class.” Some may call themselves upper-middle class and some may claim to be lower – but nearly everyone believes that they are part of a middle class that in actuality no longer exists – unless that “middle” is composed of those 20 percenters – my class.
This American ideal of equal opportunity is also quickly evaporating, if not already gone. The economic model which drives this country is not a meritocracy (as many would like to believe) but a plutonomy.
What Does Plutonomy Mean?
Economic growth that is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority.
Investopedia explains Plutonomy
This buzz word was initially coined by analysts at Citigroup in 2005 to describe the incredible growth of the U.S. economy during that period despite increasing interest rates, commodity prices and an inflated national debt. Citigroup analysts argued that as such an economy continues to grow in the face of contradictory elements, the more important the society’s ultra rich become to maintaining such growth. The analysts also believed that in addition to the U.S., Canada, Great Britain and China are also becoming plutonomies. Link
So why does all this concern me? For the same reasons it should concern many of you! Our economic troubles are not about the rich paying more in taxes or the little guy asking for a handout – those are the boilerplates used to simplify the big issues for people who don’t have time to devote intellectual thought to the problem.
The economics of this country – and the world – continue to rapidly change in ways that are not conducive to nation-strength. Some will say “adapt or die” and what’s funny about that is the ones most likely to say it don’t believe in evolution – a certain irony… My fear is that as this country continues to sink in every measurable in terms of describing a first world nation the inevitable result is a revolution. I may not be a 1 percenter, but I am somewhat comfortable in my 20 percent class and have no desire for displacement.
Our 53 percenter friends seem to miss a glaring point. Only a select few of them are in the 20 percent class (or higher). It is the 80 percent that continue to deal with stagnant wage growth (in fact after inflation: wage erosion). Blue collar and manual labor jobs are not in enough supply to meet the available labor demand and those jobs that are available barely pay enough to qualify at above the poverty line.
College graduates, statistically shown to have better wage-earning potential in a lifetime, account for 30 percent of the population. Moreover, the latest recession and labor market constriction has led many to question the value of a college education after factoring in the amount of debt graduates accumulate putting themselves through college. Our accelerated drive toward plutonomy will soon begin hitting the college-educated job sector as advancements in information technology allow for further off-shoring jobs that traditionally required physical presence – this is already taking place in portions of the health care sector.
For decades America has bemoaned the loss of domestic jobs as economic globalization has taken root. First textiles, then manufacturing, financial and information technology jobs, soon you may be able to consult your Indian doctor via video teleconference in his home office in New Delhi.
As Anne Applebaum (a conservative columnist) writes in her Washington Post column:
“Although I still believe in globalization’s economic and spiritual benefits — along with open borders, freedom of movement and free trade — globalization has clearly begun to undermine the legitimacy of Western democracies. “Global” activists, if they are not careful, will accelerate that decline. Protesters in London shout,“We need to have a process!” Well, they already have a process: It’s called the British political system. And if they don’t figure out how to use it, they’ll simply weaken it further.” Link
This isn’t simple altruism – it’s self-preservation, sprinkled with a healthy desire for economic justice.