Refusing to Reinvest in the Country

I really have come to believe that The Powers That Be have lost sight of the fact wealth is the lifeblood of any the economic system and that if it stops circulating the economy itself will die. 

Here in the US the latest mantra has to repeat the wholly unsupported claim that the rich are “job creators” and that if the rich have their taxes raised then they will stop creating jobs.  The belief seems to be that the richer we make the top 1%, the more wealth magically will be transferred to the rest of the economy.  Of course, this doesn’t work and it hasn’t worked, despite 30 years of increasing income inequality.

Over at Digby’s on Monday, David Atkins had a piece up asking “Why Are Young People So Upset and Disenchanted?" and breaking down the federal budget to determine how much money our government is reinvesting back in the nation’s economy.  Of a $3.5 trillion budget for fiscal year 2010, government spending breaks down as follows:

            --$1,120 billion consisted of by military expenditures and veterans’ benefits;

            --   $707 billion consisted of Social Security payments;

            --   $732 billion consisted of Medicare, Medicaid, and the Childrens’ Health 

                           Insurance Program;

            --   $496 billion consisted of other safety net programs;

            --   $210 billion consisted of interest payments on our existing debt.

That totals $3.265 trillion dollars, the vast majority of which is devoted either to military expenditures – which have the least economic stimulative effect – or to maintaining the elderly and the less fortunate, which (don’t get me wrong) is a laudable goal and the only decent thing a civilized people can do but also does not reflect an investment in the nation’s future.

That leaves a grand total of $235 billion to be spent on every other federal expenditure:  law enforcement, NASA, the Center for Disease Control, education, technology, medicine . . . everything.

But it gets even worse.  A federal budget of $3.5 trillion is about 24% of our GDP for FY2010, which means our GDP was about $14.853 trillion.  But as Atkins points out, we only collected tax revenues for the year of $2.2 trillion, and borrowed the remaining $1.3 trillion.  That means the US had an effective tax collection rate of only 15.08% of its GDP in FY2010.

This is astonishingly low.  Here is a chart comparing tax collection rates for various countries as compiled by the OECD, which indicates that in 2006 America’s effective tax collection rate was 28% -- still generally low compared to the rich European countries but nearly twice the figure for 2010.

The bottom line is that the US collects low taxes as a percentage of its GDP in comparison to other industrialized countries.  If the nation’s GDP were being shared equally with the population, i.e., if increases on productivity were being realized as increased wages and benefits by the population as a whole, this might not be so bad.  If we all were sharing equally in the economy’s growth, then there might not be any need to tax the wealthy and in order to reinvest that money back into the economy and keep its lifeblood flowing.

But, of course, that’s not the case:

(Click to enbiggen.)

Instead, we see that from these charts that almost all the increase in income for 30 years has gone to the top 1% (the top 20% also have realized an increase, but that quintile includes, of course, the top 1% . . . which largely counts for what is presented as a gain by the top 20%). 

So in 30 years we have been stuck with an economic system that concentrates its wealth in the hands of a very few where – because we have largely reduced the progressivity of our income tax schedule by slashing taxes for the wealthy – all that wealth tends to remain. 

This is not only inequitable, but by allowing this money to pool in the hands of the very few The Powers That Be effectively are gutting and hollowing out the nation’s economic system by preventing its lifeblood from flowing.  

What are seeing -- what we have been seeing for 30 years -- is not the growing of an economy but the plundering of an economy.  Life the farmer who doesn't practice crop rotation, what to pass on to his children may long have been depleted by the time it is their turn to run the family farm.  No wonder Atkins was able to identify why young people are so disenchanted with the system:  “Even if they don’t know the details, young adults understand that they’re getting screwed.”

America and the Baby Boomers

November is a wonderful time to be living on the southeastern coast of North Carolina and – if I squint just right – I can see that I am lucky to be living where I am right now.

My home suffered some major damage when Hurricane Irene came ashore a few months ago and, since then, the dogs and I have been living in my parents’ former home on the mainland.  This house is slowly being renovated and, while that is going on, they themselves are living in a smallish condo in the next town over.  So, for now, the dogs and I are in a fairly large place that squats right on the Intracoastal.

The house’s living area is found on the second and third floors, so there is sufficient height to look out over the Intracoastal across the marsh islands and beyond to where the inlet empties into the Atlantic Ocean at the end of the island where my own place is.  On cool but sunny November mornings like today’s you can watch the rising sun light up the mirror-like water and see flocks of geese glide by.  From time to time pods of dolphin break the water’s surface, and pleasure boats heading south for the winter glide past the large bay windows.  It is extremely beautiful and very peaceful.

“How the GOP Became the Party of the Rich”

No!

No, no, no, no, no, no, no, no, no!!

That’s a bad Tim Dickinson!  Bad!!  That is not how it is done!

Via Hunter, I see that Tim Dickinson has a great article in this month’s Rolling Stone titled “How the GOP Became the Party of the Rich,” which you can read by clicking on the link.  And you really should click on the link, the article is very, very good.  I hope to be able to put together a more substantive post about it later today, but for now I just wanted to quickly get down this Minor Rant in the Key of Aggrieved.

Oh! The Stupid Things I Hear! No. 3

Goddammit.

So I’m listening to the Diane Rehm “Friday News Roundup” (the BBC’s Katty Kay filling in for Diane) this morning and the initial topic is the new jobs report, which shows that 80,000 jobs were added last month:  104,000 new private sector jobs, offset by a loss of about 24,000 public sector jobs.

First I hear Ron Elving, senior Washington editor for NPR News, make the incredibly stupid claim “that’s not bad, but it’s not great either.”  No, that’s friggin terrible.  Look . . .  the United States needs to add about 150,000 new jobs every month just to stay even with population growth.  So a jobs report showing that we created about ½ that amount last month means that October was utterly horrible.  Telling the American public that “we added 80,000 jobs” without putting that figure into context is just journalistic malpractice.

But far, far worse was what Elving said next. 

Economic Inequality is - Literally - Killing Us

A fascinating article in Time discusses research that shows high degrees of economic inequality in societies leads to greater mortality, less healthy populations, higher rates of addiction, and greater stress levels. This is the case regardless of the overall weath of the country studied, regardless of the fact that the people in lower economic rungs are not actually living in poverty, and regardless of one's access to health care.

And, following up my earlier point about how things in America seem to have taken a turn for the decidedly worse with the election of Ronald Reagan in 1980, once again we see:

In the U.S., inequality has been rising since the 1980's. Between WWII and Ronald Reagan's election to the presidency, average income grew by about $19,000. The bottom 90% of the country received 65% of that increase.

Between 1981 and 2008, however, average income grew by about $12,000. About 96% of that went to the top 10% richest people in the country. The ratio of pay between CEOs and average workers also became much more extreme over the same time period: in 1980 it was around 35 to 1. Today it is about 185 to 1.

So not only are the very wealthy keeping all the income gains at the expense of everyone else, they're literally killing everybody else by doing so.

Occupy Wall Street: My Suggestion

You end up like a dog that’s been beat too much

‘Til you spend half your life just covering up.

                                                                       --Born in the USA

                                                                       Bruce Springsteen

Over at Plutocracy Files the always estimable Taryn Hart has a great post up about the Occupy Wall Street protest titled “The Left Drops the Ball."  Essentially, she notes that some on the Left have criticized OWS for the protest’s lack of clear cut demands – what, specifically, do they want? – and points out that those carping from the Left haven’t exactly done anything to help:

Gee, wouldn’t it be great if we had a bunch of progressives who were paid to think about such things full time?  Maybe whole groups of people who wrote endlessly about politics, economics and how to make a more equal society?  So yeah, you get my point – that would be the progressive blogosphere.  (Many of whom have advanced degrees in economics and are employed full time at think tanks and/or universities.)

[snip]

Really, the progressive blogosphere has an opportunity – a very rare opportunity – to actually be useful.  Many bloggers/think tankers have really useful expertise and they know things about proposed Financial Transaction Taxes, various technical solutions for debt forgiveness, etc.

Because here’s the thing:  We’re talking about a kind of difficult fucking problem here.

After reading Taryn’s post I started to comment on it, but only wrote a few sentences before I realized that I was having a bunch of thoughts that didn’t fit very well in a small comment section.  So I thought I’d come back to Casa Cognito to work through some of the ideas her post sparked.

Results are below the fold.

Wealth Condensation: Why the Rich Get Richer

Back in the late 19^th century an Italian engineer-turned-economist named Vilfredo Pareto was coming up with some interesting notions regarding wealth distribution.  Pareto had noticed that quite a bit of Italy’s wealth seemed to be concentrated in the hands of only a few people.  After some diligent work, he determined that approximately 20% of the population owned about 80% of the land.  It was the beginning of an inquiry into why it is that in every human population – every single one – the majority of that population’s wealth concentrates itself in the hands of a very few people.

Screw "Shared Sacrifice"

Jonathan Tasini has a highly recommended post up over at The Daily Kos titled “Three Grand Myths."  In his discussion of one of these Grand Myths – the nation’s debt and deficit problems – Tasini tosses out this observation:

In a press release incomprehensibly titled, “Conrad’s 50-50 Proposal is a Good Sign,” [a] “progressive” leader praises Sen. Kent Conrad – one of the leading purveyors of the phony deficit crisis – for a proposal that would cut critical government services by hundreds of billions of dollars:  “The Conrad proposal is the first strong Democratic proposal that has come out of these negotiations.”

The statement is full of self-delusion – that is, that a “50-50 proposal” could cut $2 trillion from the budget but, the statement demands, the proposal has to be one in which, “No deal that takes more out of the programs for middle income and poor Americans than it takes from tax breaks, loopholes and havens for the rich and the big corporations, and no deal that undermines the economic recovery.”

The statement promotes and endorses the immoral framing of “shared sacrifice” – that people who already have paid dearly for the financial mess of the past years with millions of jobs lost and devastated retirement funds, should give even more to repair damage they had no hand in creating.  (emphasis added)

I think this is a great point, and one that I’d take even further.  Forget about only the suffering caused by “the financial mess of the past [few] years” – that doesn’t go nearly far enough. 

I want us to recognize that the Reagan Revolution of 1980 was the start of America’s economic brickhouse being turned into a 30-year Ultimate Rave featuring a great DJ, an open bar and an all-you-can eat buffet . . . except that only the already affluent were invited to the party.  And I want us recognize that the time has come to finally put our economic house back in order, and that this means acknowledging that the strength of our nation’s economy ultimately rests on and derives from the economic security of its citizens – all of its citizens.

But I damned sure don’t want to hear anything about how “everybody has to share the sacrifice” that comes from rebuilding our house.  Let those who ate and drank and partied so well during the past 30 years of supply-side gibberish, Voodoo Economics, and crony capitalism pay all of the costs for their good times.  The rest of us didn’t get to go to the party, we shouldn’t be asked now to clean up the mess.