Does Economic Inequality Really Do That Much Damage to The Nation?

Last night in this time slot we looked briefly at how American plutocrats-- and their servants in politics and the media-- think it's only natural that we raise the retirement age and the Medicare eligibility age. Well, of course! How little empathy this self-entitled masters of the universe have for ordinary people! I should have included a little discussion of Joseph Stigliz's OpEd in Saturday's NY Times, Inequality Is Holding Back The Recovery. It's so frustrating that Obama keeps picking Wall Street shills to oversee fiscal and economic policies rather than people like Stiglitz who have a real understanding of economics, not just an understanding about how to rig markets for the one percent. "[W]ith inequality at its highest level since before the Depression," he wrote, "a robust recovery will be difficult in the short term, and the American dream-- a good life in exchange for hard work-- is slowly dying." Somehow I fear Jack Lew is as unlikely to have ideas like this drive his work as Treasury Secretary as Tim Geithner was-- and did.

Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena, when they are in fact intertwined. Inequality stifles, restrains and holds back our growth. When even the free-market-oriented magazine The Economist argues-- as it did in a special feature in October-- that the magnitude and nature of the country’s inequality represent a serious threat to America, we should know that something has gone horribly wrong. And yet, after four decades of widening inequality and the greatest economic downturn since the Depression, we haven’t done anything about it.

There are four major reasons inequality is squelching our recovery. The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. While the top 1 percent of income earners took home 93 percent of the growth in incomes in 2010, the households in the middle-- who are most likely to spend their incomes rather than save them and who are, in a sense, the true job creators-- have lower household incomes, adjusted for inflation, than they did in 1996. The growth in the decade before the crisis was unsustainable-- it was reliant on the bottom 80 percent consuming about 110 percent of their income.

Second, the hollowing out of the middle class since the 1970s, a phenomenon interrupted only briefly in the 1990s, means that they are unable to invest in their future, by educating themselves and their children and by starting or improving businesses.

Third, the weakness of the middle class is holding back tax receipts, especially because those at the top are so adroit in avoiding taxes and in getting Washington to give them tax breaks. The recent modest agreement to restore Clinton-level marginal income-tax rates for individuals making more than $400,000 and households making more than $450,000 did nothing to change this. Returns from Wall Street speculation are taxed at a far lower rate than other forms of income. Low tax receipts mean that the government cannot make the vital investments in infrastructure, education, research and health that are crucial for restoring long-term economic strength.

Fourth, inequality is associated with more frequent and more severe boom-and-bust cycles that make our economy more volatile and vulnerable. Though inequality did not directly cause the crisis, it is no coincidence that the 1920s-- the last time inequality of income and wealth in the United States was so high-- ended with the Great Crash and the Depression. The International Monetary Fund has noted the systematic relationship between economic instability and economic inequality, but American leaders haven’t absorbed the lesson.

Our skyrocketing inequality-- so contrary to our meritocratic ideal of America as a place where anyone with hard work and talent can “make it”-- means that those who are born to parents of limited means are likely never to live up to their potential. Children in other rich countries like Canada, France, Germany and Sweden have a better chance of doing better than their parents did than American kids have. More than a fifth of our children live in poverty-- the second worst of all the advanced economies, putting us behind countries like Bulgaria, Latvia and Greece.

Our society is squandering its most valuable resource: our young. The dream of a better life that attracted immigrants to our shores is being crushed by an ever-widening chasm of income and wealth. Tocqueville, who in the 1830s found the egalitarian impulse to be the essence of the American character, is rolling in his grave.

Even were we able to ignore the economic imperative of fixing our inequality problem, the damage it is doing to our social fabric and political life should prompt us to worry. Economic inequality leads to political inequality and a broken decision-making process.

That, alas, is the actual goal, not an unintended consequence, of conservative economic policies and the agenda of an overly powerful One Percent. That's the arrogance of extreme wealth; they bought the political system and, they feel certain, it's up to them to run it for themselves and their families and class. They want-- more than anything-- low labor costs. If not actual slaves, then as close as you can get. High unemployment, part of the GOP agenda, drives wages down. So do neo-liberal, so-called "Free Trade" policies pushed vigorously by both Bushes, Clinton and Obama. As Stiglitz goes on the point out, "a typical male worker’s income in 2011 ($32,986) was lower than it was in 1968 ($33,880). Lower tax receipts, in turn, have forced state and local cutbacks in services vital to those at the bottom and middle." And has home prices have plummeted and incomes fallen, tuition has soared-- along with student debt. This is the goal of conservative economics. It's what the Ryan Budget was all about and what John Boehner, Eric Cantor and Miss McConnell dedicate every day of their miserable lives to. Stiglitz-- if not Geithener and Lew-- understand it didn't have to be this way.

Instead of pouring money into the banks, we could have tried rebuilding the economy from the bottom up. We could have enabled homeowners who were “underwater”-- those who owe more money on their homes than the homes are worth-- to get a fresh start, by writing down principal, in exchange for giving banks a share of the gains if and when home prices recovered.

We could have recognized that when young people are jobless, their skills atrophy. We could have made sure that every young person was either in school, in a training program or on a job. Instead, we let youth unemployment rise to twice the national average. The children of the rich can stay in college or attend graduate school, without accumulating enormous debt, or take unpaid internships to beef up their résumés. Not so for those in the middle and bottom. We are sowing the seeds of ever more inequality in the coming years.

The Obama administration does not, of course, bear the sole blame. President George W. Bush’s steep tax cuts in 2001 and 2003 and his multitrillion-dollar wars in Iraq and Afghanistan emptied the piggy bank while exacerbating the great divide. His party’s newfound commitment to fiscal discipline-- in the form of insisting on low taxes for the rich while slashing services for the poor-- is the height of hypocrisy.

There are all kinds of excuses for inequality. Some say it’s beyond our control, pointing to market forces like globalization, trade liberalization, the technological revolution, the “rise of the rest.” Others assert that doing anything about it would make us all worse off, by stifling our already sputtering economic engine. These are self-serving, ignorant falsehoods.

Market forces don’t exist in a vacuum-- we shape them. Other countries, like fast-growing Brazil, have shaped them in ways that have lowered inequality while creating more opportunity and higher growth. Countries far poorer than ours have decided that all young people should have access to food, education and health care so they can fulfill their aspirations.

Our legal framework and the way we enforce it has provided more scope here for abuses by the financial sector; for perverse compensation for chief executives; for monopolies’ ability to take unjust advantage of their concentrated power.

...As Mr. Obama’s second term begins, we must all face the fact that our country cannot quickly, meaningfully recover without policies that directly address inequality. What’s needed is a comprehensive response that should include, at least, significant investments in education, a more progressive tax system and a tax on financial speculation.

The good news is that our thinking has been reframed: it used to be that we asked how much growth we would be willing to sacrifice for a little more equality and opportunity. Now we realize that we are paying a high price for our inequality and that alleviating it and promoting growth are intertwined, complementary goals. It will be up to all of us-- our leaders included-- to muster the courage and foresight to finally treat this beleaguering malady.

How Bill Maher wound up with the first standing ovation in the history of his show:



Later Grayson told Rachel Maddow how Wall Street predators and plutocrats wrecked the economy with the connivance of our political elites, Washington's Conservative Consensus.

Years ago, they took a healthy economy and they gave us 9 percent, 10 percent or more unemployment. And they destroyed 20 percent of our national wealth in the course of just 18 months from the middle of 2007, to the end of 2008, destroyed 20 percent of our national wealth accumulated over the course of two centuries. And nobody's been prosecuted for it. Nobody's been indicted. Nobody's been convicted.

So, first, there's no accountability. The second thing is that they've created a system that is enormously unequal. And the result of that is people are struggling to find a job to pay their bills, to pay their rent, to pay their credit card bills.

According to Wikipedia, there are only five countries in the entire planet that are more unequal than the United States in the distribution of our wealth. That's a system that Wall Street created, that Wall Street maintains, and that Wall Street enforces.

And the way that they enforce it is the third gripe. The third gripe is Wall Street controls and dominates our political system. One party is a wholly owned subsidiary of Wall Street and the other caters to Wall Street all too much. So, people got into the situation right now where they feel that the system is completely unresponsive and they're driven deeper and deeper into debt and misery.

...The economy has been grossly mismanaged by Wall Street and by others. And people see that Wall Street is running our economic policy. That big oil is determining our energy policy, and that the military industrial conflicts is determining our foreign policy and miring us in these endless costly wars.

People are just fed up.

So, what do they do? What's left to do? What is the one thing you can still do as a human being?

You can go someplace. You can go someplace and in this world of the Internet, you can show yourself. And that`s what the people on "Occupy Wall Street" are doing. They're doing the one last human thing left. They're going somewhere.