Why is there increasing poverty in America?

We pretend that we are a fair and equal culture. And yet we let rampant greed take over.

Image Credit: Spencer Platt/Getty Images

We know that poverty is increasing in America.  And yet what are we doing to stop it? We pretend that we are a fair and equal culture. And yet we let rampant greed take over.

We know from history and numerous articles on the subject that both economic growth and average annual income grew virtually in lockstep from 1945 until Lewis Powell wrote his infamous memo, suggesting that workers’ salaries could be maintained at a low level. From that time on, economic growth continued to rise, but salaries stagnated and have continued to stagnate.

Suggestions – indeed, demands! – that the system be changed back to the post-war model have been rejected as “socialist” by the wealthy and the economists in their pockets.  In the same way the political campaigns and policies of Bernie Sanders have been branded as unacceptable, even though what he is suggesting is really what Franklin D. Roosevelt championed in the 1930s. According to the wealthy, our society cannot afford universal free education, Medicare for All, a fight against climate change, and a number of other programs which are necessary to keep our society and its economy healthy and advancing.

“Since 1973, when the salaries and wages of average middle class and working class Americans became uncoupled from the growth in the productivity and profitability of the American economy, middle class and working class Americans, except for minimal, grudging adjustments for inflation, have not received a REAL increase in pay. This while at the same time compensation for corporate executives began to rise dramatically, and the costs of food, housing, motor vehicles and fuel, medical care, higher education, etc., began to increase astronomically.” 

In other words, poverty in American starting in 1973 was a planned action by the wealthy.  They bought off Bill Clinton, turned the Democratic Party into a neo-liberal corporatism organization and began draining the salaries of the middle and lower classes into the pockets of the already rich.

What happened to all the money?  The myth of capitalism is that the capitalists take the money that they earn and plow it back into their businesses. If that were true, then the industrial and commercial sectors of the economy would have increased exponentially as greater profits went to the stockholders in businesses. But that did not happen. These sectors did not expand greatly, and employment fell. So the money went into other investments – everything from real estate to stocks and bonds and valuable artwork and the like. (And as is well know, cities like New York have many unoccupied apartments, which were essentially purchased as investments with the extra cash).

We also know that the share of productivity produced by AI (artificial intelligence) has increased over time. But as this has increased, employment (particularly in the industrial sector) has decreased. So the overall trend is that employment will go down and AI use will got up, with overall productivity rising.  And the prices of most goods and services will go up.

Meanwhile, as we all know, the national debt of the United States has increased greatly over the past 50 years, even as the tax rate has gone down.  The debt was $22.03 trillion in 2019, while it was only $353.7 billion in 1969. (The increase would have been an average of $433 billion annually for 50 years. However, it increased by $9.6 trillion while Obama was president and has been increasing by almost the same rate under Trump).The maximum individual tax rate was 70% in 1969 (when it was dropped to 50%).  In 2019 it was 37%. And, over time, the amount spent by the government on the military has increased. It is $652 billion in 2019. Military outlays in current dollars have grown from $139 billion in 1964, $143 billion in 1965, $160 billion in 1966, $181 billion in 1967, to an estimated $191 billion in 1968 and $200 billion in 1969 (the height of the Vietnam War). The share of the military in industrial expenditures has risen.  It would not be unfair to say that the military-industrial complex has taken a large bite out of the government’s budget. Its profits have increased while its tax rate has decreased, causing substantial debt.

When you learn that the top 1% of American households start with a net worth of $10,374,030.10, then you can see one place where we can find some of the missing money. Why not limit wealth to $5 million? The rest can go back to the society that allowed those households to earn such wealth. Instead of putting the funds into mansions, yachts, bonds and diamonds, the money can help provide free education, Medicare for All, and the other services and commodities so desperately needed.

Of course, the wealthy would describe such measures as “theft,” even if the low tax rates they have enjoyed for over 50 years is the equivalent. If sharing of wealth means socialism, then let us have socialism. But it really doesn’t matter what it is called. If we can get to the result, and the society is better off for it, then we should do it.  The top 1% won’t suffer if their household wealth is limited to $5 million.

Let’s not forget that the assets which are “extra” are – for the most part – not liquid.  So it would take quite an effort to sell them, especially when the richest buyers no longer have much liquidity. Nevertheless, they can be sold eventually, pumping money into the economic system and bettering the society as a whole.


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