Tuesday, April 24, 2012

Can We Get a Do-over?

The question is, is a moral vision governing the economic life of our country, antithetical to aims of a successful capitalist society? In other words, is it preferable to have a system which assures continued astronomical growth of a few at the expense of a persistently weakened, shrinking middle class and a growing population falling into and trapped in poverty in America. 

Former Congressman David Obey, has a prescient analysis and warning about continuing on such a path - it is difficult for me to see how arguments against his presentation hold water. 

Excerpts of Obey's speech follow. The full text of his presentation is can be found  hereThe video contains Obey's remarks and an interesting panel discussion.

"Americans want to succeed.  And yes, they want other Americans to succeed.  They want hard work, risk, and imagination to be rewarded, but they believe there are certain norms of decency.  They don’t want a tiny lucky few to take all the marbles because the warped “markets” do not provide any checks and balances that give hardworking wage earners any power at all to defend their right to a decent living standard."

"Studies tell us that two factors account for much of the explosive growth in the gap between the uber-class and everyone else."

"The first is the nature of corporate governance which produces obscenely high compensation packages for corporate CEOs.  The second is that investment income is taxed at a much lower rate than income from wages.  The old saying “You have to have money to make money” is more true today than ever before. 

Now apologists for this picture will say that “economic volatility will produce a churning effect that will enable people from low-income families through initiative, to join the elite.”  That argument no longer holds water."

"I submit that both the Occupy Movement on the left, and the Tea Party movement on the right are rooted in the belief that today’s political and economic decision making processes are producing little of value to people of modest means.
Yet, so many of the political voices who have sounded the alarm the loudest about the anemic middle class in third world countries, seem to have no problem whatsoever with the almost obscene growth in income inequality that has occurred in our own country over the past generation.

·        Between 1979 and 2000 the income gap between the top 1% and the poorest 40% more than tripled.
·        In 1976, the top 1% of earners took in 9% of the nation’s total pretax income -- by 2007, that had grown to 24%.
·        The top 1% today has net worth larger than the bottom 90% of our population.
·        The top 400 households paid 17% of their income in federal income taxes in 2007-- down from 30% in 1995.
·        400 Americans now control more wealth than the poorest 150 million Americans.
·        The CIA tells us that income inequality in the US is greater than it is Yemen.
·        Tax rules have been changed so that consumers can no longer claim a tax deduction on interest on credit cards but they can still claim a deduction for mortgage interest.  That creates incentives to borrow against your house rather than borrowing against your credit card. That means that if those people lose their jobs, instead of facing a credit card crisis, they face the loss of their home.
·        And the tax code is so packed with tax exemptions, gimmicks, and preferences that taxpayers receive almost as much in tax credits ($1.08 trillion) as they pay in income taxes ($1.09 trillion).  So the income tax is being used largely to transfer wealth, not to raise revenue.  And, much of that wealth is being transferred up the income scale.

"The Congress reviews appropriated amounts in the budget every year during the annual appropriations process but no such annual review is conducted on these tax giveaways.  They survive for generations without serious examination.
The result of all of this is that the income gap between the economic elite and everyone else is once again the largest it has been since the Great Depression was triggered in 1929."

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