© Phil Wendt, 2012
This is the fourth in a series of essays on the issue of income disparity in the United States. In the first three essays (See: Income Disparity by the Numbers, Income Disparity By the Numbers: Volume II – The One Percent, and Income Disparity by the Numbers: Volume III – How we Got Here) I laid out the basic metrics describing income disparity in this country, started to raise issues regarding basic fairness, and discussed the overall issue of wealth and power in more quantitative terms. My intent here is to editorialize how income disparity may inform our views regarding the upcoming election. But first let’s review what some of the research findings from my first three essays say about income disparity in this country.
The overall conclusions from the first three essays are summarized below.
- The wealth of this country is being more concentrated over time into fewer and fewer people at the top.
- Upper end (top 20% and the top 5%) wage earners are not only earning more, their wealth is expanding at a faster rate than those in lower income brackets.
- The bottom 80% of wage earners have seen their share of aggregate wealth steadily decline over the past forty years, while the upper 20% has steadily increased their share of this country’s aggregate wealth.
- Income disparity is not a new or even recent event. In fact, it’s not an event at all, but a process that has been steadily ongoing, virtually unchecked, for the last forty years and more.
- The failure of the G.W. Bush tax policies has discredited supply-side economics (Reaganomics) just as inflation had discredited Keynesian economics before that. We are well past the point where tax cuts can fix what ails us, and continuing to do so only exacerbates the ever-expanding income disparity in this country.
- Wealth and income in this country are not just concentrated in the top 1%, but even more concentrated in the upper .1 and .01% income levels. While the income of the lower 90% increased only 1% from 1980 – 2008, income at the highest levels, .1 and .01% income levels, increased from 50% to over 400% respectively.
- Corporate tax policy has, through various loopholes and the prevalence of offshore tax havens, created a culture where a new superstar, the CEO, rules the roost. Who are these .1 and .01%ers if not CEOs? What and how these superstars are paid significantly affects the income disparity paradigm.
- The stagnation and decline in income share of the lower 80% can be seen as a result of a long-term attack on unionized labor, where the decline in unionized labor and their influence on collective bargaining coincides with the decline in health and retirement benefits of private sector employees (union and non-union), as well as the overall decline in income share across the board.
- Reaganomics and the trickle-down theory did nothing for the lower 80% of income earners; of all the wealth created between 1983 and 2004, 42% went to the top 1%, and a whopping 94% went to the top 20%. That left a paltry 6% of the remaining wealth to trickle down to the lower 80%.
Income Disparity and the 2012 Election
“… if you’re business makes something other than wealth, then you and you alone are left to the fate of “Market Forces” because you’re not too big to fail. The jobs you create will never be as important to the GOP as the wealth created by the financial capitalists.”
So how does the income disparity paradigm play into the 2012 elections? How you see that depends on just where along the economic spectrum you fall. In the broadest of terms, I personally see that this election is about two opposing forces: one directed primarily at protecting the wealth generating entitlements and processes that have contributed to the last 40 years of growing income disparity; and the other pushing to at least maintain the status quo of the middle class, with perhaps the long-term hope of advancing the plight of the poor and middle class together. In short, it’s about wealth vs. jobs. Oh yes, both parties extol the need for creating new jobs, but I believe that the GOP is far more interested in protecting wealth and the wealthy, and see ‘jobs’ as a wedge issue against which to measure the effectiveness of the current administration.
The GOP’s Paul Ryan, Chairman of the House Budget Committee has proposed a budget, which Mitt Romney wholeheartedly endorses, and is a broad attempt to reduce spending by diminishing the “Welfare State” (Perhaps no one told Mr. Ryan that Atlas Shrugged was fiction.) But while Mitt and the GOP see entitlement programs for the poor such as welfare and Medicaid only as a drag on the economy, I believe that the federal tax code is just as much an entitlement program for the wealthy. Otherwise, for example, how could Warren Buffett, one of the richest men in the world, admittedly pay less in federal taxes than his secretary?
Mitt Romney is the personification of the wealthy elite, the .1 or .01%ers. Bain Capital, his self-described main credential for making him the best qualified to run the country, is an asset management firm. They ‘make’ nothing other than wealth for their clients using their client’s money. On occasion they may create some jobs and make one of their acquisitions run more efficiently, but it’s not about creating jobs. The gain and/or loss of jobs is merely a coincidental byproduct of their real goal of creating wealth. The success of Bain Capital, or Mitt Romney for that matter was never measured in how many jobs they created, but by how much wealth they created for their investors. Jobs were created and jobs were lost, and jobs were sent overseas, but the real bottom line for Bain and Romney is the bottom line…creating wealth, not jobs.
This is the new capitalism; creating wealth from wealth, using money to make more money, under the tired old premise that all this wealth at the top is good for the country at large. Unfortunately, as we’ve seen from my prior essays, little or none of that wealth trickles down to anyone. This new finance-based capitalism is essentially a jobless endeavor, or at least not a very job-intensive one. So creating jobs is a red herring for Mitt Romney and the GOP. What they really want is to keep the wealth-generating machine of the .1% and .01%ers humming along, and they need control of the White House and Congress to do that.
Let’s contrast this new capitalism with an example of the old style capitalism. In the days of Henry Ford, capitalism was alive and well, but took on a different look than the finance-based capitalism of today. Henry Ford was a capitalist, but he was also an industrialist. He actually made things, and got wealthy doing it. The difference is that he figured out that if the guy working on his assembly line couldn’t afford to buy what Ford was making, he knew he wouldn’t be very successful. Ford knew that his success and that of his company was tied to that of his employees. So yes, Ford got wealthy, very wealthy even by today’s standards, but in so doing, he brought his factory workers along with him. No, they didn’t get wealthy, but they made a good wage and the economy grew because of it. In a sense, this was pre-Reagan trickle-down economics at work because the rising tide of Henry Ford floated many other boats along with his.
Oh we still make things today, even automobiles. But when it came to protecting one of our oldest auto manufacturers from bankruptcy, the White House stepped in to save those jobs while Mitt Romney still proclaims that they should have been allowed to fail. The financial markets have recovered because they were allowed to get too big not to recover. But if you’re business makes something other than wealth, then you and you alone are left to the fate of “Market Forces” because you’re not too big to fail. The jobs you create will never be as important to the GOP as the wealth created by financial capitalists.
So if you’re a 1%, .1% or a .01%er your choice in this election is clear. For the rest of us, the choice should be just as clear.