The wealth gap
The fraudsters behind a pyramid scheme go to great lengths to make the program look like a legitimate multi-level marketing program. Pyramid schemes don’t work unless somebody loses. Those at the bottom of the pyramid are essentially defrauded by those on top.” (www.sec.gov/answers/pyramid.htm)
On the eve of the 2010 midterm elections, Leslie Stahl on “Sixty Minutes” reported that in the U.S. the wealthiest 5% control $45 trillion worth of assets. In other words, those people could pay our entire national debt—at that time $15 trillion—and barely notice it. To help eliminate the debt, people like Mike Bloomberg, who is worth around $30 billion (enough to endow 30,000 lifetimes at a million dollars per, without touching the principle), could surrender $10 trillion and scrape by with what remains (enough for only 20,000 lifetimes). Bloomberg is not one of our wealthiest people, some of whom have enough to permanently endow hundreds of thousands of lifetimes.
Such people used to support federal spending. After WWII, when our highest income tax rates were in the 90% range, we rebuilt Europe and Japan, paid for the GI Bill, financed a massive Cold War arms buildup and created our Interstate Highway System. Doing all that resulted in our war debt actually decreasing (see chart, below or at www.nytimes.com/interactive/2011/07/28/us/charting-the-american-debt-cri... ), then leveling off as tax rates were cut. Before tax rates were reduced, post-war America was experiencing the greatest growth spurt in its history. Even Republicans were happy.
But then a strange thing happened. Starting in the 1980s under Reagan-Bush, our debt took off at the same time that tax rates began a downward spiral. A coincidence? When our economy was growing at its fastest historical rate, the corporate contribution to federal revenue was 47%; now it is 7%. Data show that there is a highly correlated, inverse relationship between our national debt and average tax rates. The less revenue the government receives, the more it borrows for its necessities, in other words.
During the Clinton years, a surplus was generated, but George W. Bush reversed that trend by granting the largest tax cut ever. The wealthiest people on Earth suddenly became much wealthier. One estimate puts the value of the Bush giveaway of 2003 at $100,000 per hour to the Walton family (Wal-Mart) alone.
Things have gotten a lot worse since Stahl’s report. Now the top 1% “earn” about 80 cents of every dollar of corporate profit generated. And two thirds of all large companies pay no tax at all. We actually use tax dollars to pay some, like highly profitable General Electric, to continue operating here. For tax year 2011, every statistical American—including the newborn, disabled, homeless, in hospice care, or comatose and vegetative—gave GE $12, which amounts to $3.5 billion in rebates, even though GE off-shored 15,000 jobs that year and showed $14 billion in profits.
The wealthiest Americans—both individuals and corporations—have money and assets beyond imagination, beyond counting, beyond spending. They have become like James Bond characters who seek only to distort reality with their power. Mitt Romney, from last year’s general election, is worth “only” $300 million, not even in the ballpark of real wealth in America, but during the election he reported that on yearly earnings of over $21 million, he paid less than 14% or about $3 million in taxes. He was able somehow to make ends meet and try to gain the White House, even though his money was “sheltered” in offshore accounts. But Warren Buffet, worth billions and vowing to give most of it away before he dies, asks why he pays a lower tax rate than the people who clean his house.
About that coincidence mentioned above, “In a naked pyramid scheme, 90.4% of people lose their money, while in product-based pyramid schemes, that number jumps to a shocking 99.88%” (money.howstuffworks.com). As the matching arithmetic tells, our economy has been made to perform exactly like a product-based pyramid scheme, the product here being the belief that the “open market,” free and fair, affords everyone equal opportunity to succeed. Our markets are so “open” that Medicare may not negotiate drug prices, lethal non-foods may not be removed from food-stamp eligibility and our largest corporations are on the dole. To wit: “Promoters at the top of the pyramid make their money by having people join the scheme” (scamwatch.gov). Everyone in the pool.
Here’s the scheme: cut taxes for the rich, who will (someday) create jobs; meanwhile, work hard and pay your taxes to subsidize the wealthy; reduce spending for the needy, for education and for research in order to slow the growth in our national debt, which is “threatening our economy.” Oh, and pay close attention to sports, merchandise, bling, vidgames, Fox News and other diversions that distract us from how our government has been subverted by wealth. Don’t rock the boat, in other words. The people who matter are doing just fine.
This “supply side” scheme has never worked, not under Hoover, not under Reagan, when it was called “voodoo economics,” not under the Bushes, and not by applying Tea Party rules. We have gotten to the point in this country where we don’t have the sense to apply what worked in the past and to avoid what led to disaster. We have once again, as in 1929, 1982 and 2004, embarked on an unsustainable redistribution of wealth upward toward people who don’t need it, can’t spend it, and don’t care what it could and should be doing for our society as a whole.
Our “service” on the debt (“interest” or what the homies call “vig”) amounted to $223 billion in 2013, a major expenditure of the government. It is more than we spend for education and research combined. Do you know anyone who owns T-Bills?
[Anthony Splendora is from Milford, PA.]