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Published: Tuesday 11 October 2011
While some number of the wealthy may have succeeded by working hard and being smart or creative, many of the very wealthy got their money directly or indirectly through the big hand of the government tilting the playing field in their direction.
When Being Rich Makes Us Poor, People Should Occupy Wall Street
The Very Serious People in Washington are busy trying to find creative ways to cut Social Security and Medicare and take other benefits from middle-class and moderate-income families. The refrain here is that we just can’t afford this level of generosity any more.
There are two parts of this story that should drive the rest of us crazy. And it is difficult to determine which one is the more infuriating.
The first is that we know that many people in this country are fabulously rich. And as Elizabeth Warren beautifully reminded us, none of them did it on their own. But Professor Warren is actually far too generous in her account.
While some number of the wealthy may have succeeded by working hard and being smart or creative, many of the very wealthy got their money directly or indirectly through the big hand of the government tilting the playing field in their direction. Their hard work involved rigging the rules to ensure that they ended up on top.
Nowhere is this better seen than on Wall Street, which is chock full of multi-millionaires and billionaires who got to the top by taking advantage of items like “too-big-to-fail insurance” for their banks, gambling with government-insured deposits, ripping off state and local governments on pension management fees, and of course the trillion dollars in bailout bucks given at interest rates that were way below market levels. These people know the role of government very well, even if they pretend this is all about a free market.
But the banks are not the only ones who rig the rules. The drug companies profit enormously from government-granted patent monopolies. Drugs are generally cheap, that is why it is possible to buy hundreds of generic drugs for $5 or $6 per prescription at chain drug stores. Drug companies are able to charge hundreds or even thousands of dollars for prescriptions because they have patent protection. As a result we spend close to $300 billion (at $1,000 per person) a year for drugs that would cost around $30 billion a year in a free market.
The government rigs the deck for the rich and powerful in other ways as well. Under the current enforcement pattern in labor law, the government comes down like a ton of bricks on any union that breaks the rules – for example by having an unlawful strike. By contrast, companies get away with a slap on the wrist for even the most flagrant violations of labor law.
Our trade policy was designed to put downward pressure on wages for the bulk of the country’s workforce by putting them in direct competition with low-paid workers in the developing world. This effect is exacerbated by the over-valued dollar. Meanwhile, those in relatively privileged professions, like doctors and lawyers, remain largely protected from international competition.
The list of ways in which the wealthy have structured the rules to ensure that they stay rich and get richer is lengthy. But the fact that the Very Serious People are looking to cut Social Security for the elderly and Medicaid for the unemployed at a time when Countrywide’s Angelo Mozilo and Citigroup’s Robert Rubin are still immensely rich is only the first reason that the public should be furious at those in power.
The second is the cause of the current downturn. The reason that we have 26 million people unemployed, underemployed or out of the work force altogether is not that we are poor, but rather that we are rich. The immediate problem facing our economy is not one of too few goods and resources; it is a problem of too little demand. And this is what should make the Wall Street Occupiers and everyone else absolutely furious at our leaders.
If people had more money in their pockets, then they would buy more goods and services. Companies would then hire more people to produce these goods and services and we would then have more jobs. The unemployment and poverty that the country is experiencing today is overwhelming the result of a failure of political will.
If the federal government increased spending on infrastructure, gave teens jobs cleaning up their neighborhoods, gave state and local governments the funds to keep teachers and firefighters employed and encouraged employers to shorten work hours rather than lay off workers, we could quickly get the economy back to full employment. Economists have known this story for more than 70 years, but somehow creating jobs doesn’t rank as high on the priority list in Washington as cutting Social Security and Medicare.
In short we have an economic system that, even when it is working, has been rigged to redistribute income to rich. And we have a political system that at a time of immense economic distress is more focused on undercutting the means of support for working families than fixing the economy. It is hard to understand why everyone is not occupying Wall Street.
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ABOUT Dean Baker
Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is the author of several books, including Plunder & Blunder: The Rise and Fall of the Bubble Economy, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and The United States Since 1980. He was the editor of Getting Prices Right: The Debate Over the Consumer Price Index, which was a winner of a Choice Book Award as one of the outstanding academic books of the year. He appears frequently on TV and radio programs, including CNN, CBS News, PBS NewsHour, and National Public Radio. His blog, Beat the Press, features commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in economics from the University of Michigan.
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15 comments on "When Being Rich Makes Us Poor, People Should Occupy Wall Street"
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That's really thniking out of the box. Thanks!
October 12, 2011 3:44pm
The American dream is alive and well for the wealthiest 1% of Americans, but unfortunately, if you are in the other 99% the jury is still out.
"America is obviously a country where you can go from being middle class to upper class, but right now class mobility has sort of collapsed in the United States," says Zaid Jilani, senior reporter for the progressive think tank ThinkProgress.org. (See: America's Middle Class Crisis: The Sobering Facts)
This grim reality is in part the impetus for the Occupy Wall Street movement, which, now in its fourth week, will take to the streets of Manhattan's Upper East Side Tuesday in what it is calling the "Millionaire's March." Demonstrators will rally outside the homes of some of the city's wealthiest, including News Corp. (NWS) head Rupert Murdoch and JPMorgan Chase (JPM) CEO Jamie Dimon, to protest New York state's 2% millionaire tax set to expire at the end of the year.
As the Occupy Wall Street movement continues to grow, The Daily Ticker wanted to find out just how rich America's super-rich 1% really is. Jilani recently compiled the following research, entitled How Unequal We Are: The Top 5 Facts You Should Know About The Wealthiest One Percent of Americans.
As discussed in the accompanying interview, here's what Jilani outlined on his blog:
#1) The Top 1% Owns 40% of the Nation's Wealth:
Nobel Laureate Joseph Stiglitz points out the richest 1% of Americans now own 40% of the nation's wealth. This disparity is much worse than it was in the past, as just 25 years ago the top 1% owned 33% of national wealth.
How much does the bottom 80% own? Only 7%.
#2) The Top 1% Take Home 24% of National Income:
While the richest 1% of Americans take home almost a quarter of national income today, in 1976 they took home just 9% -- meaning their share of the national income pool has nearly tripled in roughly three decades.
#3) The Top 1% Own Half of the Country's Stocks, Bonds and Mutual Funds: The Institute for Policy Studies illustrates this massive disparity in financial investment ownership, noting that the bottom 50% of Americans own only 0.5% of these investments.
#4) The Top 1% of Americans Have Only 5% of the Nation's Personal Debt:
Using 2007 figures, sociologist William Domhoff points out that the top 1% have 5% of the nation's personal debt while the bottom 90% have 73% of total debt.
#5) The Top 1% Are Taking In More off the Nation's Income Than at Any Other Time Since the 1920s: Not only are the wealthiest 1% of Americans taking home a tremendous portion of the national income, but their share of this income is greater than at any other time since the Great Depression, as the Center for Budget and Policy Priorities illustrates in this chart, using 2007 data.
October 12, 2011 2:45pm
Our lawmakers have no intention of approving ANYTHING our president proposes. They will work hard at making him fail; at trying to make him look like a fool, anything so they can look good in the upcoming elections.
Its a shame there isn't a news station in the big 3 that will represent US, and call them out.
Amen!! I agree with you one hundred percent.
Jennifer Camp
October 12, 2011 5:39pm
you are lucky to have a smart lawmaker
October 12, 2011 2:41pm
This was posted elsewhere today, but it is well worth re-posting:
How Much Revenue Would Be Realized IF:
• The rich were taxed at 40%
• A financial speculation tax of ½ of 1% were imposed on each side of every stock trade? (from Nation of Change 9-26-2011)
• Cuts of 15% on everything paid out to our lawmakers – including salaries and expenses
• Lawmakers’ staffs were reduced by 25%
• Suspend retirement savings payments to lawmakers until deficit is reduced. Only withhold Social Security and Medicare. JUST LIKE US ! !
• Require lawmakers to pay at least 50% of health care insurance costs out of pocket
• Make Wall Street repay the billions (trillions?) they bilked us out of
• Reinstall all controls that were eliminated on Wall Street
• Eliminate subsidies to Big Oil
• Audit tax returns/payments of Big Oil, Big Business
• Eliminate subsidies to mega farms
• Make Big Business pay their share of taxes.
• Heavily tax goods coming back into the US from abroad by Big Business (goods produced from outsourcing, not free trade items)
Form a “Federal Bank” in direct competition with the big banks, to back smaller community banks in making loans to small businesses, making mortgages, and in general, stimulating growth. This would be run as a bank (not like the ones “We, the people” bailed out so they could turn around and screw us), and help us in growing our economy.
Social Security and Medicare are NOT entitlements. They are fully funded, in an account separate from the general fund used to run our country. It was raided by the Reagan administration, but it is still solvent. For now.
Since these funds belong to “We, the people”, and our lawmakers are trying to steal them from us, can we bring a class action lawsuit against those that are trying to steal them?
By the way, the no administration had the right to steal my money. I want my money replaced.
October 12, 2011 5:45pm
mostly good idea but spec tax will just drive market from nyc to some place like singapore -- tariffs smoot-hawley did not work out
October 12, 2011 1:43pm
Thank you Dean,
Great article.
People are dying out here.
Here's my position.
THE NEW AMERICAN PIRATES, ARE KILLING AMERICANS.
This story is not about glamorized or fictional piracy. This is, “real piracy.”
Hundreds of our wealthiest leaders and most powerful corporations know that in the next few years, they will be able to siphon, skim, and steal, so much “NEW CASH,” that they and their progeny will be ultra-rich for generations to come.
Welcome to the modern “Piratical Capitalism” movement. And, welcome to WAR!
No, this is not funny, or fiction, or a conspiracy, it is just simple greed and simple theft.
The new pirates of America have launched an all-out siege on us in order to capture, amass, and hold trillions of dollars for themselves.
All of the recent political power grabs and nonsensical debating is purely a slight-of-hand deflection. President Obama, Democrats, Republicans, the International Press, and even the Tea Party, are watching the tiny pea in the shell game…while the rich and powerful “Piratical Right” is stealing America right out from under us.
Consider that their combined total plunder from corporate flipping, downsizing, offshore labor, speculation, price fixing of oil and energy plus, corruption in defense, health care, banking, student loans, foreclosures, etc., etc., is a trillion dollar treasure for these pirates.
Go ahead, put your own calculator to it.
Are they smarter than we are? Yes, and they are laughing at us. I, we, you, and all of us, have not been able see the big picture of what is happening to our own country and to our own people. The rape and theft of America, has been cleverly packaged, promoted, and sold under the guise of “cost-cutting,” “deregulation,” and “free enterprise.”
The “Piratical Right” is directly responsible for millions of people dying, getting sick, losing their jobs and homes, losing their ability to fight, their spirit, and even losing their will to live. The sick smell of this carnage now permeates the air across America.
To us, this is all unimaginable, because we look for some sense or the morality of things. These modern-day American pirates however, have no moral compass. They are devoid of any conscience, humanity or soul, and are feeding on the flesh of the American people.
Don’t look to the President, the Senate, Congress, the press, or any political party to help. Sadly, they just don’t see it, don’t care, or are part of it. “We the people” are on our own. Start asking questions. Demand answers. If we don’t fight back America…who will?
History has taught us how to stop piracy.
By Mr. S. Pimpernel 10/10/2011
Background: I have secretly worked inside of a famous Right Wing organization plus, have 30+ years working with the Fortune 100 and face-to-face with their Presidents. If anyone thinks my comments are over-the-top, then I suggest they put a couple of good researchers and accountants on it and crunch their own numbers.
Just take care. If gov. gets too paranoid, they could send out the riot troops. Be prepared for the worst. All my hopes to u all.
Bullard, TX
October 12, 2011 1:27pm
Excellent article, Dean Baker. Excellent comment, Angel J. Perea. I agree and I would like to point out in passing, that this Camp-in- the-Street protest did not begin in the U.S. I refer to the 15-M Indignados of the Puerta del Sol in Madrid. Since the 15th of May they have been protesting what is essentially the same thing, loss of jobs, cuts in programs to help the middle class, graft and waste which has put fresh millions and billions into the pockets of the few who were always rich and now are richer.My heart is with all those who protest this trend. We need their courage. Those who are elected everywhere must learn that this is the time to listen to the people. Or the future will be worse than anything we have imagined here in the U.S.The Free Market is gone...or never was. The Fee Market is alive and thriving. Solidarity. Barbara Dahms
October 12, 2011 1:19pm
http://www.youtube.com/watch?v=jAdu0N1-tvU&feature=related
Know who we're really fighting. Not the well-to-do or the wealthy, but the Global Elite. The Occupy Protestors Should all see this video.
October 12, 2011 12:53pm
I was waiting when Americans would finally rise up. University students will be next. The world looks on in disbelif at your countries politicians fight to grind your country to a halt. The republicans and their debt fiasco and now they want more cuts to your working middle class? They should be rioting in streets (peacefully I hope),
October 12, 2011 10:06am
Americans, particularly you independents, Today’s Vote proves that McConnell and Senate Republicans and two Demos Lester / Nelson as well as House Speaker John Boehner and House Majority Leader Eric Cantor and Kevin McCarthy had no intention of supporting any jobs for Middle class Americans! Americans are longer asking where the job is creating legislation in the House of Representatives that you promised last election. We are furious?
According to Senator Bernie Sanders, it is now clear that the Republicans /hypocrites continue their pledges for their “only” plan of continuing its Class War against the Middle Class to protect their rich Millionaires and Billions like the Gover Norqest, Russ Limbaugh, Rupert Murdock and others like the Koch Brothers that provide them their campaign funds! Their plan was never about creating American jobs for the unemployed middle class! They proved that when they voted against unemployment benefits because they said you were too lazy to a job! This is a clear and concise recap of what is the real issue? American march on Wall Street to Stop the hypocritical republicans! 81% of Americans are disgusted with political prostitutes taking thousands of $$ from the same billionaires and Millionaires! Are you listening Mr. McConnell and Boehner, Cantor and your obstructionists? Another year of no taxes for Grover Norquest and his Billionaires and Millionaires for the called "job creators," but still no new jobs? What's the deal with the right wing clowns in Senate and House? In November we will remind you that It’s all about jobs stupid
Go to: http://politics.nytimes.com/congress/votes/112/senate/1/160