For the past year or so the issue of income inequality has been a much discussed topic on cable news and in certain publications. It has, however, failed to move into the mainstream dialogue because it has largely been a subject best understood and discussed by economists. It’s something many know exists, most vaguely understand that it’s bad but few are able to explain how it came about or how it effects them, that is, until a few days ago when Tim Dickenson published, “How the GOP Became the Party of the Rich” in Rolling Stone and exposed the process in clear, step by step detail. And he didn’t stop there. He succinctly explained how the Republican party and who in it were complicit in the moral equivalent of the theft of trillions of dollars from the American middle class and of sorely needed services from the poor, the elderly , the very young and the ill all so that they could give it to the rich.
The only problem I have with Dickerson’s story is that he pointed the gun but he didn’t pull the trigger. He didn’t say why a gang of supposedly well-educated, dedicated public servants would abandon the public who elect them to the avariciousness of a ultra-greedy few so I will. It’s because they are paid to. It’s as simple as that; they are paid by the rich to make the rich more rich. Our government no longer works for us. It’s been bought. Our congressmen and Senators now work for those whose campaign donations put them in office and keep them there. For so many of our elected representatives serving their constituents is not their most prized goal; that is getting reelected so they can keep raking in corporate dollars.
Dickenson begins his story by recapping:
“Since Republicans rededicated themselves to slashing taxes for the wealthy in 1997, the average annual income of the 400 richest Americans has more than tripled, to $345 million – while their share of the tax burden has plunged by 40 percent. Today, a billionaire in the top 400 pays less than 17 percent of his income in taxes – five percentage points less than a bus driver earning $26,000 a year. 'Most Americans got none of the growth of the preceding dozen years,'" says Joseph Stiglitz, the Nobel Prize-winning economist. "All the gains went to the top percentage points."
You can read Dickenson's full article at http://www.rollingstone.com/...
A recent report from the Congressional Budget Office puts it another way using data from 1979 through 2007. When the top 1 percent of wage earners is removed from the equation, incomes shows a relative even growth. To be sure, there is a small difference in growth between those in the 21st to 80th percentiles and those in the 81st to 89th percentiles but the difference is not great and certainly would not have sparked the unrest and outrage now seen all over the world.
In order to understand how we got to this point we need to take a brief look into the past, specifically, the 1920s. Outside of agriculture, which had been experiencing an economic depression since the end of World War I, the American economy during the 1920s was robust and vibrant. The war accelerated a rapidly expanding industrial growth that had begun during the civil war and added the technology to make the goods produced within reach of more and more Americans. Automobiles, refrigerators, radios, all once the toys of the rich became available to almost everyone. All this growth had a downside, however, and that downside was that irresponsible practices became endemic in a number of businesses, particularly banking and investing. Lines became obscured and unsecured debt became the order of the day. On October 29, 1929, it all came to a crashing halt.
Clearly, the stock market crash wasn’t the only cause of the Great Depression but it was certainly one of the major causes. When Franklin Roosevelt took office in 1933 he and his economic team recognized immediately that two problems had to be addressed quickly. The first was getting the nation back to work and the second was instituting controls on the business practices which had led to the collapse of the stock market. Roosevelt started on the first with the creation of the Works Progress Administration and the Civilian Conservation Corps. The second was remedied, in large part, by the Glass-Steagall Act. Very briefly, Glass-Steagall imposed four new regulations on the financial industry. First, commercial banks were prohibited from engaging in investment activities. That is, commercial banks could no longer risk monies given to them as savings in investment schemes in which the investor's money (rather than the banker's) was lost if the scheme failed. Secondly, investment banks could no longer also act a commercial banks, the compliment to the first provision. Next, no Federal Reserve member bank could affiliate itself with any bank primarily involved in investment activities and finally, no individual could serve in an official capacity for a commercial bank and an investment bank at the same time. Each of these restraints responded to a specific abuse prevalent in the 1920s. For a more complete discussion of Glass-Steagal and it’s demise please see my post titled, “The Death of Glass-Steagall, An American Tragedy
(http://www.rodgzblog.blogspot.com/...)
Glass-Steagall worked well and protected the financial interests of the average American for about 70 years; then the Republican plot to overturn it came to fruition. The attack on Glass-Steagall started slowly. In the 1960s banks began employing lobbyist to argue the case for banks being allowed back into the bond market. Lobbying against Glass-Steagall quickly became a career specialty and a very lucrative endeavor. Still, not much changed during the 1970s but with the 1980s came Ronald Reagan and with him came his blatant and avidly anti government message.
Reagan promised to take government off the backs of enterprising Americans. He famously told voters, "The nine most terrifying words in the English language are, I'm from the government and I'm here to help." Reagan preached that regulation impeded business and financial growth and he sold what a member of his own party, George H. W. Bush, termed voodoo economics to an unsophisticated and gullible public. The problem was, of course, Reagan was wrong. Worse, even a cursory look at his philosophy should have made it obvious that he was wrong. For the 50 years between Glass-Steagall and Reagan the American financial markets operated with great stability. There were, naturally, periods of boom and recession, but the country's financial system avoided the kinds of jolts and hysteria that have upset the American economy in recent years, the very upheavals Glass-Steagall helped prevent. We have to remember here, Reagan was a actor and he was very skilled at selling lies to a willing and credulous audience.
Now, about the same time that Ronald Reagan was moving up in the political world a little known writer and political activist named Ayn Rand was also gaining a small but influential following of up and coming Republican politicians including, among others, Alan Greenspan. Rand had some ideas of merit. She supported abortion rights and opposed the Vietnam War but she was also an ardent free-marketeer and a committed anti-communist0. It’s a compliment to the force of her personality that she became and remained so popular despite being wrong so often in so many areas. That a totally free market eventually collapses on itself has been clearly demonstrated over and over for the past 200 years. For more on this please see my post titled,
Bubbles, Crashes and How Tulips Outed the Myth of the Free Market.”
(http://rodgzblog.blogspot.com/...)
We also know that the communist scaren the famous “red menace,” of the 1950s was little more than a witch-hunt and an opportunity for J Edgar Hoover to avoid focusing the FBI on organized crime, the real threat at that time.
Unhappily, Rand also espoused a philosophy she called Objectivism. This isn’t the place for an in-depth look at that philosophy but suffice it to say that it was, and still is, an essentially selfish and soulless pseudo-philosophy with particular appeal to the greedy and the "me firsters." whom would eventually become the proprietors and the Watch Dogs of Wall Street and big business. In it’s simplest form Objectivism is based on the idea that the only reality you can know is your own so what ever is best for you is the proper course to pursue. I suppose you could liken it a bit to the difference between distal and proximal stimuli in the sense that a Randophile believes that the world is just as they see it and how anyone else might perceive it is not important. I don’t know whether so many Republicans were drawn to Rand because Objectivism filled a void already existing in their lives or whether they became intoxicated by her personality and, thus, drawn into her cold and callus belief system. Either way, it allowed the Republican party to evolve as an organization in which lying was not only permitted it was desired.
In addition to the myriad of typically transitory and topical lies Republicans tell on an as needed basis there are two enduring lies, first made a matter of policy by Reagan, that have become like bedrock to them. The first lie anchors their argument for deregulation and I’ve already mention it, that a free market will always respond to supply and demand and will correct itself without external intervention. History has repeatedly shown us the dishonestly behind that claim. The other great lie is that cutting taxes on the rich spurs the economy, creates jobs and allows the largess to “trickle down” to the untermensch. We’ve been able to experiment with this idea in a nation-sized laboratory for thirty years and it should be clear for all to see that “trickle down” is, indeed, just another lie. Remarkably, that doesn’t seem to be the case. The Republicans keep selling it and a staggeringly high number of us keep buying it, perhaps because there’s a corollary to “trickle down” and that is the totally unfounded belief that if I make all the right moves someday I won’t be an untermensch; someday I’ll be one of them.
So, what does this have to do with income equality? Well, using Reagan’s voodoo economics as a starting point and Ayn Rand’s Objectivism as tacit justification Republicans began to attack Glass-Steagall and other regulatory legislation and to remove the protections put in place to prevent the exploitation of America’s financial system from the irresponsible and the esurient. From there, it was just a matter of natural evolution, of, in a sense, Social Darwinism at it’s worst. With restraints removed it became possible for bankers, financiers, hedge fund managers and their ilk to plunder the economy and buy the connivance of politicians who were supposed to be looking out for the public interests. Those politicians have, however, not come cheap. The Center for Responsive Politics, a nonpartisan research group, estimated that in 2006, independent interests spent about $300 million on elections and now, thanks to the collusion of a corrupt Supreme Court and their Citizens United decision, there is effectively no longer a limit on how much can be spent to buy your favorite congressman.
The money has, though, been well spent. With the influence purchased with their obscene incomes, corporation and plutocrats have been able to secure legislation favorable to themselves and their officers while blocking legislation that would spend money to benefit millions of average Americans and they have done this without a shred of shame. In 2010, 46.2 million Americans , 15.1 percent, lived in poverty. That was an increase from 14.3 percent in 2009 and was the fourth consecutive annual increase in the number of people living in poverty. The number of poor people in 2010 was is the largest number in the 52 years the statistic has been kept. Between 2009 and 2010, the poverty rate increased for children under age 18 from 20.7 percent to 22.0 percent. Worse, twenty-five percent of very young children in America are living in poverty and number of children under six living in poverty rose to 5.9 million in 2010 from 5.7 million in 2009, according to researchers from the Carsey Institute at the University of New Hampshire. All this so an elite few could have more yachts, more limousines, more houses and so corporations could off-shore more money and more jobs.
At a time when the true unemployment rate, not the one the government publicizes, is equal to or above the 16 percent unemployment seen in 1936, the height of the Great Depression, the Republican answer is more tax cuts for the wealthy, more benefit cuts for the elderly, the sick, the young and the poor and more tax increases for the middle class. It doesn’t bother them a bit to tell the same old tired lies about the same old time tested and failed policies and it won’t as long as we continue to return the same self-interested, professional politicians to office.
As bleak and tenebrous as this all might sound there does appear to be one bright spot. This isn’t the first time we’ve had to fight this battle. Franklin Roosevelt once said, "Government by organized money is just as dangerous as government by organized mobs." He couldn’t have been more right. That is what bought us into the Great Depression and it’s what brought to the brink of a second one. The fight against monied interests is an ongoing fight and it has to won over and over. Still, the oligarches’ stranglehold on America might not be as firm as it once appeared to be. A small group of protesters in a park in New York have sparked an awareness bordering on a revolution. The way Occupy Wall Street has spread not only around the country but around the world should give notice that the people have had enough, the people are coming for them and it no longer matters how many police they deploy, how many protesters they assault or how many encampments they bulldoze. The Hoovervilles gave birth to the New Deal; OTW is on the verge of doing the same.