plutocracy

Chuck Collins: America needs a 'plutocracy prevention' program

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Via OtherWords.org

BOSTON

The U.S. is suffering from excessive wealth disorder.

This isn’t your parents’ inequality influenza, but a more virulent strain of extreme disparities of income, wealth, and opportunity.

Just 400 billionaires have as much wealth as nearly two-thirds of American households combined. And just three individuals — Jeff Bezos, Warren Buffet and Bill Gates — have as much wealth as half of all U.S. households put together.

Since the economic meltdown of 2008, the lion’s share of income and wealth growth hasn’t gone just to the top 1 percent — it’s gone to the richest one-tenth of 1 percent. This 0.1 percent includes households with annual incomes starting at $2.2 million and wealth over $20 million.

This group has been the big winner of the last few decades. Its share of national income rose from 6 percent in 1995 to 11 percent in 2015. But their biggest gains are in wealth, increasing their share from 7 percent in 1978 to over 21 percent today.

That’s 210 times their share of the population.

When you have over $20 million, you’ve easily taken care of all your needs and those of the next generation of your family. You’re living in comfort, probably with multiple homes, and don’t want for anything.

It’s at this point we see the telltale signs of excessive wealth disorder. Despite being already comfortable beyond measure, segments of this 0.1 percent will often invest their wealth to rig the political rules to get even more wealth and power.

They contribute the legal maximum donations to politicians and then do an end run around campaign finance laws to siphon even larger sums through “dark money” SuperPACs, using corporate entities that don’t have to disclose donors.

When this donor class demands tax cuts, their political puppets kick into overdrive to deliver the goods.

The 0.1 percenters create charitable foundations that become extensions of their own power and privilege. They undermine the health of the nonprofit sector by controlling a growing share of the charitable giving pie.

They deploy their wealth to help their kids get into elite colleges, both through donations and, as we’ve seen recently, outright bribery.

It’s clear the rest of society needs to intervene. Excessive wealth disorder is wrecking life for the rest of us.

What can we do? We need to put forward a “plutocracy prevention program” — public policies to reduce the power of this top 0.1 percent group.

Some presidential candidates are stepping forward with bold ideas. Senator Elizabeth Warren’s wealth tax idea is a courageous step in this direction. She’s proposed a 2 percent annual tax on wealth over $50 million, with a 3 percent rate on wealth over $1 billion.

Progressive Democrats have proposed raising the top marginal tax rate to 70 percent on households with incomes over $10 million. Senators Kamala Harris and Bernie Sanders both have proposals to make the estate tax more progressive and slow the accumulation of dynastic wealth.

Polls show widespread popular support for these proposals. All of them face steep sledding in a Congress beholden to the top 0.1 percent donor class.

One first step might be a proposal that exclusively targets the 0.1 percent class. How about a 10 percent income surtax on incomes over $2 million, including capital gains?

That’s not as steep as a 70 percent marginal rate, but it would move us in the right direction. It would raise substantial revenue — an estimated $70 billion a year and $750 billion over the next decade — from those with the greatest capacity to pay.

Bringing such a proposal to a vote would require lawmakers to make a clear choice: Are you with the vast majority of voters who believe the super-rich should pay more? Or are you carrying water for the richest 0.1 percent?

Chuck Collins, who is based in Boston, directs the Program on Inequality at the Institute for Policy Studies.

An arrogant plutocrat for the masses; bees imperiled

How curious that middle- and lower-income Americans who feel with some justification that they have been treated with disdain by an increasingly arrogant and selfish plutocracy turn for leadership to a sleazy, arrogant and narcissistic member of the plutocracy.

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The Zika virus is leading to calls for massive pesticide spraying to kill mosquitoes carrying the virus. The trouble with that is that such spraying will also kill the bees upon whose pollination much plant and animal life depends. Bees are already in decline, a continuation of which could pose an existential threat to humans.

Plutocrats and their kids in the Ivy League

See how the super-rich help their kids get into and prosper at Ivy League schools. This piece might be the best example  yet of how America is no longer the land of opportunity it was long touted to be but a self-perpetuating plutocracy, where overwhelmingly the most important thing you can do for success in life is to pick rich, powerful and, preferably, pushy parents. Harvard and Brown universities are  paradises for this sort of thing.

Another is Dartmouth College. Read this.

 

Robert Whitcomb: Ignore 'inverson'; marina people; Tughill Plateau

Corporate “inversion’’ involves a previously U.S.-based company merging with a foreign one, reincorporating abroad and, by so doing, taking advantage of foreign corporate income-tax rates generally lower than ours. Many public companies are not paying anywhere near the 35 percent federal corporate income-tax rate because of assorted tax breaks; some companies pay no income tax because of loopholes. Still, all in all, our corporate rate is not competitive with our major foreign competitors’.

Some have called companies using inversion “unpatriotic.’’ I disagree. The senior executives and members of the boards of directors making these decisions are legally maximizing their and the company’s wealth in a partly capitalist system that, for all its faults, fuels innovation and prosperity for the entire country — over the long haul. Most individual taxpayers also try to optimize their tax situation.

And, as I have long argued, the corporate income tax is stupid, except for the lobbyists it enriches. It encourages maneuvers such as inversions. It sends jobs abroad. It supports a lobbying system in Washington that spawns corruption and makes the world’s most complicated tax system ever more complex and inefficient as corporations seek tax breaks from elected officials.

Anyway, in the end companies’ customers, employees and shareholders pay the corporate income tax. Companies just pass along the cost.

We need to end the corporate tax and enact a value-added (consumption-based) tax. We should also put personal earned income and capital gains on a more equal tax basis and maintain substantial estate taxes. The aim should be to help streamline and detoxify our tax system, encourage economic growth and at least mildly mitigate the growth of a permanent plutocracy based on inheritance.

 

* * *

Automation and information technology are now rapidly wiping out well-paying jobs. They’ve long been wiping out low-paying ones. Indeed, those automatic store checkout machines are starting to make inroads into one of the last few fallbacks for those with only a high-school education.

The line is that somehow the economy, blessed by ever-increasing productivity, will create a whole new wave of well-paying jobs to replace the ones killed. We’re still waiting.

Even upper-middle-class jobs are in peril. Consider lawyers, much of whose routine work can be done through computers and low-paid (by our standards) people, in, say, India. And medical equipment, nurse practitioners and ever-better prescription drugs will undermine physicians’ affluence.

Then there’s finance. Many college undergraduates, especially at elite institutions, career plan as if Wall Street were the only sure way to fortune. But they may be guessing wrong. Just because finance was the big thing in the last three decades doesn’t mean that it will be in the next 20. Many young people could find their Wall Street jobs as redundant as many jobs in manufacturing became in the ’70s. We tend to fight the last war.

Some futurists suggest plausibly that such service jobs as plumbers, electricians, gardeners and maids, along with home health-care and social workers and other counselors, may have the best chance of survival. In some fields, even the middle class will still demand personal service.

To reduce social disorder, will the government eventually establish a minimum income for those millions who truly can’t find work?

 

* * *

I just visited the gorgeous Thousand Islands, on the St. Lawrence River. We cruised for parts of two days in our host’s powerboat, which he keeps in a roofed marina in Clayton, N.Y., another one of those small Northeast towns whose downtowns seem to be regaining a bit of their old energy as big-box stores lose some allure to an aging population.

The vast majority of boats remained in their slips, rather than being taken out on the river, on a beautiful summer weekend. This can be explained in part by fuel costs but more, I think, by the marina’s social role. Most of these boat owners, whose age generally ranges from 50 to 80, primarily see the marina as their summer colony, with the boats (most with sleeping space for from two to eight people) as their summer bungalows.

During the short North Country season, they relentlessly schmooze with their neighbors and derive some meaning from endless boat maintenance. They live in a cozy waterborne village. What most of these people would not have liked back home — living cheek-by-jowl — they thrive in for a few weeks every summer.

 

* * *

We drove home through upstate New York’s Tughill Plateau, which has hundreds of wind turbines. The white wind turbines and the vivid green of the countryside, with its view of the Adirondacks, create a spectacular, if a bit eerie, landscape. Most of the farms are far better kept up than I remembered from years before — because of the fees paid to them by the utilities. A very green cash crop and no cash paid to the Mideast!

 

Robert Whitcomb (rwhitcomb51@gmail.com) oversees New England Diary. He is also a senior adviser and partner at Cambridge Management Group (www.cmg625.com), a health-care consultancy,  a former finance editor of the International Herald Tribune, a former editor at The Wall Street Journal, a former  editorial-page editor and vice president at The Providence Journal and  currently a Fellow of the Pell Center for International Relations and Public Policy.

Emily Schwartz Greco/William A. Collins: Good news for public is bad news for Wall St.

  NORWALK, Conn.

For the first time since 1997, the U.S. economy just added at least 200,000 jobs per month for six months running. GDP grew at a 4 percent annual clip between April and June. The percentage of Americans who describe the economy as “good” has climbed to the highest level of President  Obama’s presidency.

Who wouldn’t rejoice over these happy milestones on the bumpy road to a real recovery?

Wall Street. On July 31, within hours of the release of a bunch of sunny indicators, stocks sank more than they had on any day since early February. The decline wiped out all gains the S&P 500 stock index had racked up over the month.

Global instability contributed to the sharp drop, but so did investors’ fretting over indications that workers are finally getting higher wages and more benefits.

And why exactly does Wall Street tank on news portending economic gains for most Americans? Don’t people with extra money in their pockets boost the economy when they spend more freely? Isn’t it something worth celebrating?

Not in an economy that caters to the rich.

You see, there are practical implications of the chasm between rich and poor for the conduct of commerce. For several years, retailers have increasingly doted on the affluent, the most alluring segment of the $10 trillion consumer spending market.

Consider how U.S. households differ. The richest 20 percent of Americans now pocket more than half of the nation’s income. The typical income for this kind of family tops $150,000, triple the norm for all of us. Together, these “high-value customers” (to borrow a phrase from LuxuryDaily.com) account for about 40 percent of all U.S. spending.

And the cost of real luxury has gotten a divorce from reality. A quilted Chanel handbag can set you back $4,900. An ultra-thin Piaget Altiplano watch could siphon 95 grand from your wallet.

There’s still some money made from selling cheap stuff to the poor and working class. That’s why the four biggest U.S. retailers are big-box behemoths Wal-Mart, Costco, and Target, along with the Kroger supermarket chain. Even the very bottom of the food chain, the people whose households eke by on $30,000 or less a year, account for a stagnant yet sizable $1 trillion bare-bones consumption market.

For them, dollar stores can be a bigger draw than the big boxes. They’re in a bind and so are the companies relying on their purchases.

“Customers are under pressure,” Dollar Tree Chief Executive Bob Sasser told The Wall Street Journal. “Unfortunately, that’s one reason why the space continues to grow.”

In a telling sign of today’s increasingly unequal times, Dollar Tree is merging with Family Dollar Stores. The No. 2 and No. 3 companies in this cut-throat market want to team up to compete with their No. 1 competitor, Dollar General. Together, they’ll fend off bids by Wal-Mart and its ilk to gobble up some of their territory with new smaller-box establishments.

Clearly, times are tough for retailers opting to sell stuff to the rest of us. But they’ve got it figured out for the most part and Wall Street worships predictability.

Think of all the economic models and assumptions that would be shattered if the drive toward wealth concentration were to take a detour toward shared prosperity.

Of course, financial experts won’t say these things out loud. Instead, they’ll mutter about inflation and freak out over signs that labor markets are growing tighter. Are those really big concerns in light of this protracted war on consumers?

If you would like to know more about how and why the rich are getting so much richer while the poor become steadily poorer (and you enjoy very long reads), check out Thomas Piketty’s 700-page masterpiece. In his wildly successful book Capital in the Twenty-first Century, the French economist has finally organized and footnoted every lost battle in this tale of class warfare.

Winning the debate, of course, isn’t enough. Until more U.S. political and business leaders decide they’ve had enough, this nation will become less of a democracy governed by the people and more of a plutocracy ruled by the rich.

Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national editorial service run by the Institute for Policy Studies. OtherWords columnist William A. Collins is a former  Connecticut state representative and a former mayor of Norwalk, Conn. This piece originated at OtherWords.org.