Commonwealth Commonsense

Graphically Speaking, Income Inequality Trends

Nice graphs, but which have the sub-hed:

Eleven charts that explain everything that's wrong with America.

Why must progressives fall into conservative’s trap? When you say “what’s wrong with America” what people hear is what’s “wrong with Americans.” And thus, the “Un-American” charge. All the good that these graphs might do with independents is destroyed by the unfortunate frame.

So, Why Are the Rich Getting Richer?

The income chasm between middle class America and the richest Americans has grown enormously over the past 50 years. Few would dispute that. Harold Meyerson lays out the stats.

From 1947 through 1973, according to the Economic Policy Institute's State of Working America report, released this week, the incomes of the poorest 20 percent of Americans rose 117 percent, while the middle 20 percent saw a rise of 104 percent and the wealthiest 20 percent a rise of 89 percent. From 1973 through 2000, however, the income of the bottom fifth increased by a scant 9 percent, the middle fifth by 23 percent and the richest fifth by 62 percent. Since 2000, the concentration of income gains at the very top has grown only more pronounced. The share of income going to the wealthiest 1 percent of Americans, which was less than 10 percent in the early '70s, reached 23.5 percent in 2007 - the highest level on record save for 1928. (Note: Both years preceded epic crashes.)

No doubt conservatives don’t think this is a problem. And they are given a pass by progressives, who decry the income gap but don’t put the question to conservatives—Why? Meyerson and others have offered some reasons—the demise of labor unions, globalization and financial schemes that add nothing to the economy but line the pockets of the few. All perhaps true, but why don’t progressives keep hammering the GOP with actually two questions:

Why do you think this is happening? Give them a chance to explain the phenomenon. By forcing a explanation, there’s a good chance progressives will get fodder for a strong counter-narrative to the second question:

Do conservatives think this income gap is a good thing?

One book I’m almost finished relates.  It’s The Soul of Capitalism by William Greider. But rather than explain the gap, the book is really more about the book’s subtitle, “Opening Paths to a Moral Economy.” I’ll have more on it in another post.

Another waiting to be read promises to offer another reason. It’s Perfectly Legal: The Convert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else by David Cay Johnston, a former New York Times tax reporter. This has always intuitively made sense to me. The folks who love to hail free enterprise ignore the fact the problem is not free enterprise versus a planned economy. It’s whether our free enterprise is really fair enterprise. Or are the rules, including tax rules, slanted to favor the wealthy?

Still, if progressives would demand answers from conservatives re why our economy increasingly seems to help only the few, they could set the foundation for the “free and fair narrative” that I think Americans would respond to.

False Argument on Taxes

Let’s have a show of hands: Do you want free-market capitalism or egalitarian socialism?

This is the argument that passes for political discourse. Victor Claar, as reported in The Post Sunday, believes that “ [w]hether because of differing intelligence, skill, ambition or luck, free markets produce different outcomes for different people, so envy is inevitable.”

That seems reasonable but he takes the argument to the illogical conclusion that because of these often random chances and opportunities, envy is behind the “social justice” urge to “spread the wealth around.” He says such ideas are “mean” because liberals are “suggesting those making over (sic) $250,000 should feel guilty for the hard work they have done to contribute something others find valuable enough to voluntarily pay for…. [P]ursuing self-interest in a system that allows you to be rewarded for pursuit of your own self-interest and at the same time in service of others? That’s certainly better than the alternative.”

And here I thought we were just talking about an adjustment to the tax code. Claar sees the end of the world as we know it.

Raising taxes on the wealthy is not socialism.  And asking those making more than $250,000 isn’t asking that they feel guilty, just asking they help pave the roads and build our schools. But that request is translated by economic conservatives as a guilt trip. Gee, now that you’ve figured me out, can I get up from the couch, doctor?

Pursuing self-interest and being rewarded for success? Seems reasonable to me. But much of what he and others are so strident in defending is not free market capitalism. What we have is a convoluted system of codes, judicial opinions and regulations that to many seem a rigged game.

Some folks just want a more level playing field, like the one we had 50 years ago while we were building interstate highways and suburban boxes for the prospering middle class.

Tax hikes are not apocalypses. But it seems to behoove those against such hikes to predict dire consequences. It much like the argument that raising taxes will shut down entrepreneurship and business investment. I doubt if a businessman wants to invest $1 million because he thinks there’s a $5 million return on investment he is, in the face of a three-four percent tax hike, going to put the money in his mattress instead of taking home $4.6 million.

Maybe worse, he’ll shoot himself because he now lives in a socialist state.

Cuts and Tax Hikes

Looming deficits will require both tax hikes, especially on the upper class who have seen their tax responsibility slashed over the past 30 years while their incomes soared, and spending reductions in the biggest program elephants in the room.  Michael Gerson, of course, doesn’t, speak of tax fairness or returning to the levels when America’s economy was at its zenith.  It needn’t be one or the other.  But at least Gerson has the cuts right.

There can be no serious reduction in federal spending without entitlement reform. Social Security and Medicare eventually will need to be transformed from middle-class entitlements given because of age to entitlements given to those with lower incomes.

…Necessary changes will not resemble the relatively painless deficit reduction deals of 1990 or 1993. This round may require not only the means testing of Social Security and Medicare but also the reduction or elimination of middle-class entitlements such as the mortgage interest deduction and the employer health-care exclusion.

I agree with all four cuts.  But then he suggests the number of public employees must be reduced.  Do we really need fewer financial and environmental regulators?  Do we need fewer teachers and police officers?  Can we get buy with fewer road repairs, snowing plowings, median mowings and parole officers?

I bring up the last four because they are of particular interest in my locality.  I’m attending a meeting tonight about what local organizations can do to get the grass mowed on our highway medians, which grows so high due to dwindling funds in the highway department responsible for maintaining them that site lines are obscured, creating traffic hazards.  My neighbors were upset about the lack of snow plowing during the past winter’s storms, which left many streets pot-marked—and still that way three month later.  And last week, some neighbors learned that a convicted sexual offender had rented a house immediately across from our local elementary school.  They were all up in arms and contacted the local parole office.  Within a day or so, the parole officer apprehended the man for violating the terms of his parole.  There are  a lot of communities who can’t afford that level of service. 

With more oil spills, stock meltdowns, and sexual predators in our communities, if Gerson gets his way, people may yearn for the days when we had adequate government.

GOP Bait and Switch

Just a brief addendum to my post the other day about the disingenuous lie that 47% pay no income tax.  As Derek Thompson of The Atlantic points out, poor people owe taxes, but they are offset by the Earned Income Tax Credit (EITC).

When Republicans rail against the 47% figure, they're railing against features like the EITC. What is the EITC? It's a refundable tax credit that rewards work and offsets the burden of payroll taxes for low-income payers by returning a fixed percent of income up to a maximum credit based on factors like number of children. But the EITC is a Republican creation. It was enacted in 1975 under President Ford (a Republican), and expanded numerous times over the last 35 years by Republicans. President Reagan (Republican) expanded it in 1984 and 1986. President Bush (Republican) expanded it against in 1990 and added supplemental credit for families with more than one child. President Clinton expanded it for childless claimants in 1993. President Bush (Republican) expanded it again in 2001.

So what we have is a program developed by Republicans to encourage welfare recipients to work instead.  When it succeeds, the GOP then pivots in its arguments and claims these very same people are cheating the government and are prime examples of “socialism.”  If it weren’t so cynical, it would be brilliant.

The Poor Rich Folks

Whenever you read this…

According to the Tax Foundation, this year the top 10 percent of earners are on the hook for about 73 percent of all the income taxes collected by Washington.

…somebody is about to tell you how skewed the tax system has become in favor of the middle class and poor.  They’ll talk about the unfairness of a system where 10 percent of the people pay 73 percent of all income taxes

First, keep in mind that they are only talking about the income taxes, not about sales taxes, real estate taxes, payroll taxes or other taxes that fall disproportionately on the middle class and poor.

Second, the reason that rich folks are paying more of the income taxes is because they make more of the money than ever before.  See “15 Mind-Blowing Facts About Wealth And Inequality In America.”

‘Tolerate Inequality to Achieve Prosperity’

You wonder if these guys ever listen to themselves.

A Goldman Sachs International adviser defended compensation in the finance industry as his company plans a near-record year for pay, saying the spending will help boost the economy. "We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," Brian Griffiths, who was a special adviser to former British Prime Minister Margaret Thatcher, said yesterday at a panel discussion hosted by St. Paul's Cathedral in London.

A Pittance for the Poor

The rich are getting richer.

The wealthiest 15,000 households, those making more than $11.5 million a year, got a record 6.04 percent of the nation’s $8.7 trillion in income, according to the study by University of California-Berkeley economics professor Emmanuel Saez. The previous year those households amassed 5.46 percent of the total, the tax data shows.

In Saez’s study, the richest Americans represent the top 0.01 percent of all households. In 1928, the year before the Great Depression began, the share of the nation’s income for this slice of households was 5.04 percent.

Hey, the poor are getting richer, too. 

Tax Notes said the richest 0.01 percent of Americans has had greater income growth than the rest of the country since the early 1970s. From 1973 to 2007, the average income for taxpayers in that category grew 758 percent, or more than $30 million. Excluding the wealthiest 10 percent, the rest of the population got an average increase of $286 over that period, or about $8.41 annually, adjusted for inflation, Tax Notes said.

It’s enough for a pack of smokes and a coke.  And you get it every year!  What are you complaining about?

What Do the French Got That We Don’t? Balls!

Say what you will about the French, their workers have the balls ours don’t.

[W]hen managers at the U.S.-owned Caterpillar factory [in Grenoble, France] refused to negotiate under pressure, workers recalled, resentments that had built up during several years of increasingly sour labor relations suddenly boiled over. About 40 employees invaded the executive suite, locked five top bosses inside and said they would be released only after resuming talks on the strikers' demands.

…The latest detention took place Thursday, when workers facing layoffs at a printer plant near Strasbourg run by Faure et Machet, a Hewlett-Packard contractor, confined their bosses in a meeting room for about 12 hours and forced them to continue negotiating on a severance package. Previously, a 3M executive in Pithiviers was held overnight after announcing layoffs, as were the head of Sony France in Pontoux-sur-Ardour and three expatriate British bosses in a Scapa Group adhesive tape plant at Bellegarde-sur-Valserine.

Meanwhile, the UAW keeps asking Chrysler and GM, “How much more do you want us to cut our pay, Mr. Boss-man?  Beat me, beat me.”

The hostage-takings, a specifically French reaction to the worldwide crisis, have been denounced as illegal by President Nicolas Sarkozy. But they have been widely applauded among the French people -- and in some instances have brought results. Most of all, they have dramatized the extent to which, in France perhaps more than anywhere else, the perspective of class struggle remains lodged in many people's minds and shapes the way they view the economic crisis.

But we don’t have class struggle here, because the GOPers tell us that’s un-American.  The fact that upper 5% of Americans have seen their incomes soar while the middle class incomes have declined in the last 8 years, well, that’s because we haven’t given enough tax cuts to the rich so more crumbs can trickle down to the rest of us.

Beat me, beat me.