Income Inequality, Redux

US Income Inequality – Too Big To Ignore

I had to frontpage this because I just can never make this point enough.  Vast income inequality is not the sign of a healthy society or economy.   H/t to Corrente for my first look at this Joseph Stiglitz article at Vanity Fare called ‘Of the 1%, by the 1%, for the 1%’. We’re back to the Versailles days and the Bush tax policies–extended by Obama–are a good part of the source of the problem.  I hate to just lift just one paragraph out of Stiglitz’ rant because the entire thing is worth reading. However, here’s two for starters.  Go read the entire thing, please.

But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing.

The other reason that I decided to front page this is the here-here response from Michael Tomasky at the UK Guardian.  It’s aptly called ‘Sad, just sad’.  He mentions something we’ve said for some time.  The villagers are also the beneficiaries of this kind of windfall.  Why would those DC beltway types want to downsize when they can blame teachers, nurses, firefighters, and police officers for all those budget woes? It’s the overgenerous tax cuts.  A nation can’t sustain itself without roads, airports, electrical grids, education, and public health and safety programs unless your idea of an ideal nation is that found in the Grapes of Wrath.

Stiglitz might have added the very important point that the majority of the country’s most prominent pundits who go on television and interpret all this for the American people, who soothe their audiences with assurances that all this is completely reasonable, are in the top 1%, which means households above around $380,000 per year. Many of course are far above that (Bill O’Reilly, Rush Limbaugh, etc.). High-end print journalists who aren’t quite at that level are still likely in the top 2%.

Anyway, the piece makes many important points, all of which boil down to the idea that while income inequality has several initial causes, there is only one thing that sustains it: a political process that is owned lock, stock and barrel by the top 1%.

Stepping back and looking at this context, and staying aware of it, makes watching these budget cuts particularly noxious. That’s not to say there isn’t waste, fine. But it is to say that the US political system of today is pretty inevitably designed to help the rich and punish the poor. So it’s no surprise when GOP Congressman Paul Ryan proposes, as he just has, cutting $1 trillion from Medicaid, which provides health care for poor people and the disabled (and to some extent, a greater extent than many people are aware, middle-class families, too, in the form of nursing-home cost support or in-home services like those from NY CDPAP agency).

Yes, Medicaid costs are high, killing the states. The feds could actually pick them up. Ronald Reagan proposed doing this. But that would be radical today. If Americans, especially wealthy ones, were paying taxes (income and capital gains) even at the rate we were in the Reagan era, we’d have no budget problems.

This brings me to the latest “Dopiest Constitutional Amendment of All Time”  discussed by former economist Bruce Bartlett. The very same people that gutted tax revenues and funding sources for ten years and went on a spending spree on Treasury Bills now want to demand a federal balanced budget amendment.  It’s not like watching the states get into deep trouble with their own versions of the stupid thing has taught any lessons.  Balanced budget amendments simply lead to bad economics.  When the revenues come in, the politicians spend like crazy on unnecessary things because the money’s there and the economy doesn’t require the expenditures.  When the recession hits, the revenues go down, and the balance the budget part hurts, they start doing things that basically put their states in worse situations.  This should be immoral, unethical and illegal.  Instead, they stick in constitutions.  Evidently none of these guys ever got away to reading the Grasshopper and the Ant. They’re all Grasshoppers until the real need for fiscal management comes into play.

Today, all 47 Senate Republicans introduced a constitutional amendment to balance the federal budget. Full text available here. Presumably, this is the amendment that Republicans plan to demand as their price for increasing the federal debt limit. Of course, simply refusing the raise the debt limit would balance the budget overnight — the nation would default on its debt and we would be plunged into the worst fiscal crisis in history, but the budget would be balanced. I have previously explained the idiocy of right wing advocates of debt default (here and here) and the idiocy of a balanced budget amendment (here and here). However, the new Republican balanced budget proposal is especially dimwitted.

At what point do the Republicans just change their name to the party of Batshit Crazy Liars?  At what point do the Democrats start fighting some of this?  It’s unbelievably hard to watch a group of people with so little at stake except their own re-election just run through a country’s future and assets like a Mardi Gras krewe tossing trinkets to bystanders.  How much more looting of national resources to benefit their cronies can we honestly take before people really take to the streets and say enough!

12 Comments on “Income Inequality, Redux”

  1. Outis says:

    I didn’t get a chance to comment on the earlier thread, but glad to hear you’re at least home resting. My friend’s stepson brought MRSA home from his mother’s house, it was a real scare and they had to bleach everything. It’s a scary bugger, glad you got it early. But since the easiest place to get it is in the hospital, good you’re able to get outta there!

    Great post. The message that the batshits are “balancing budgets” on the backs of the poor and middle class while handing out tax breaks for the wealthy is starting to be very clear and I’m seeing it in the kind of repetition people need to let it sink in. People are starting to see it affects them personally, or someone they care about.

  2. foxyladi14 says:

    love it Dak,,and everyone may enjoy this 😆

  3. madamab says:

    I think everyone IS starting to get it. Scott Walker is going to be the GOP’s designated goat for the next 20 years; he has turned even the right-wing unions against the Repubs.

    Chuck Canterbury, the national president of the Fraternal Order of Police, said his members are “shocked” by the turn of events.

    “Who are these evil teachers who teach your children, these evil policemen who protect them, these evil firemen who pull them from burning buildings? When did we all become evil?” said Canterbury, whose union endorsed Bush in 2000 and 2004 and John McCain in 2008.

    He is traveling the country to rally FOP members to rise up against anti-labor laws in their states or in support of their colleagues in other states. “There is going to be a backlash,” said Canterbury, a former county police officer in South Carolina. “We are going to hold them accountable.”

    Already, rank-and-file police officers and firefighters who long viewed themselves as separate from the rest of the movement are carrying picket signs, signing petitions and standing side-by-side with their labor brethren.

    This could be the one issue that all Americans could agree on: income inequality. Only a small percentage of Americans really think it’s okay to have 400 families owning more than 50% of the wealth in a nation of 300 million+. Everyone is getting screwed, no matter what Party they belong to.

  4. Minkoff Minx says:

    Great post Dak, this is a bit OT but here is something that only the rich would be able to afford…even at half the price it still is way over the 10 bucks that the compound pharmacy would charge…

    Maker of the Prematurity Drug Maken Slashes Its Price in Response to Critics – TIME Healthland

    The saga of the prematurity-prevention drug Makena and the outrage over its pricing continues: on Friday, the maker of the drug, a subsidiary of KV Pharmaceutical, announced it would reduce its price 55%, from $1,500 to $690 per dose.

    It also offered Medicaid programs its “standard” additional 23.1% discount and said it would cap the cost for the drug per pregnancy at the price for 15 injections.

    That’s still significantly more than the $10 per dose charged by compounding pharmacies, which currently make the drug and which the FDA announced on Wednesday it would permit to continue to do so. The drug, a form of progesterone, can cut premature births and resulting disabilities by 33%.

  5. paper doll says:

    It’s pretty irontic that Vanity Fare, one of the 1% crowd’s house organs, is the one reporting about it.

  6. Fredster says:

    Regarding the fiscal rethugs, did y’all see this about their chosen spokesperson?

    • Seriously says:

      Is it just me or is it a little weird that he filed bankruptcy over $12,500 in debt? With all the debt people are being forced to carry these days, that seems a bit on the low side for something so drastic.

      • Fredster says:

        Yeah, for 12k in 1994 it does seem a bit odd. Maybe the c.c. debts were for a failed business or something. Still, not the best spokesperson to put out there.

      • Seriously says:

        Yeah, and only $7500 of it was cc debt, $4800 was apparently medical expenses, which sort of makes him climbing up on the soapbox even more hypocritical. How about some of that compassion we showed him in forgiving his medical debt being returned?

  7. Sophie says:

    Great post Dak and a very telling article. Herein lies the crux of the problem:

    Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent.

    Just who do they really represent?