Monday, October 17, 2011

Occupy Wall Street

Why are the Occupy Wall Street protestors angry? From Business Insider, here are some charts that explain at least some of it. (Click images to enlarge them.)

I'm not going to post all of them, but the captions (in the large green font below) tell the story pretty well. Unemployment today is the highest it's been since the Great Depression, and record numbers have been unemployed for more than six months. At the same time, corporate profits are at all-time highs:

CEO pay has skyrocketed 300% since 1990. Corporate profits have doubled. Average "production worker" pay has increased 4%. The minimum wage has dropped. (All numbers adjusted for inflation).

After adjusting for inflation, average hourly earnings haven't increased in 50 years.

In short... while CEOs and shareholders have been cashing in, wages as a percent of the economy have dropped to an all-time low.

The result is that America has dropped to 93rd in income equality worldwide. China ranks ahead of us. So does India. So does Russia. So does Iran:

And, by the way, few people would have a problem with inequality if the American Dream were still fully intact—if it were easy to work your way into that top 1%. But, unfortunately, social mobility in this country is also near an all-time low.

So what does all this mean in terms of net worth? Well, for starters, it means that the top 1% of Americans own 42% of the financial wealth in this country. The top 5%, meanwhile, own nearly 70%.

And remember that huge debt problem we have—with hundreds of millions of Americans indebted up to their eyeballs? Well, the top 1% doesn't have that problem. They only own 5% of the country's debt.

And then there are taxes... It's a great time to make a boatload of money in America, because taxes on the nation's highest-earners are close to the lowest they've ever been.

As the nation's richest people often point out, they do pay the lion's share of taxes in the country: The richest 20% pay 64% of the total taxes. ... Of course, that's because they also make most of the money.

After the 2008 economic collapse, brought on by our banking system, we taxpayers had to bail out the very banks which caused the problem. Well, it wasn't fair, but we couldn't just let our financial system collapse into a pile of rubble. We needed those banks to keep lending money to American businesses.

But are they lending money? No, not so much. Instead, they're buying "risk-free Treasury bonds and other government-guaranteed securities."

And, remarkably, they've also been collecting interest on money they are NOT lending—the "excess reserves" they have at the Fed. Back in the financial crisis, the Fed decided to help bail out the banks by paying them interest on this money that they're not lending. And they're happily still collecting it. (It's AWESOME to be a bank.)

Meanwhile, of course, the banks are able to borrow money FOR FREE. Because the Fed has slashed rates to basically zero. And the banks have slashed the rates they pay on deposits to basically zero. So they can have all the money they want—for nearly free!

When you can borrow money for nothing, and lend it back to the government risk-free for a few percentage points, you can COIN MONEY. And the banks are doing that. According to IRA, the "net interest margin" made by US banks in the first six months of this year is $211 Billion. Nice!

And that has helped produce $58 billion of profit in the first six months of the year.

And those profits, of course, are AFTER the banks have paid their bankers. And it's still great to be a banker. The average banker in New York City made $361,330 in 2010. Not bad!

Keep in mind that this is from Business Insider, hardly a Marxist publication. And they have more graphs about wealth and income inequality here. They're similar, showing the same trend of vastly increasing income inequality, where a tiny fraction of Americans own most of America and the rest of us are worse off than our parents.

But check out these two graphs:

Half of all Americans own less than one-half of one percent of America's stocks and bonds. The wealthiest 1% of Americans own more than half, while the wealthiest 10% own more than 90% of America's stocks and bonds.

Why is that significant? Well, the tax rates on capital gains and qualified dividends are very, very low, ranging from 0% to a maximum of 15%. Yes, if you have to work for a living, you pay a higher tax rate - especially if you include payroll taxes for Social Security and Medicare - than those living on investment income. And who's living on investment income? Well, those graphs show that pretty clearly, don't they?

[Full disclosure:  I live on investment income, myself, so I probably pay a far lower tax rate than you do. But I don't think that's right. I don't have anywhere near the amount of money Warren Buffett has, but I do agree with him about that.]

Republican tax cuts significantly increased the wealth gap

And income tax just keeps getting lower and lower for the rich

America redistributes its wealth FAR LESS than other developed countries (via government transfers)

Is it any wonder that these Occupy Wall Street protestors are angry? We've been on the wrong path in America since Reagan. We voted for change in 2008, but change has been slow coming. Well, I certainly blame Barack Obama and the Democrats for some of that, but it's been mostly the result of Republicans dragging their feet.

Indeed, they've done more than that. They've been doing their best to make this problem worse. They've been working hard to give even more tax cuts to the rich - even to eliminate estate taxes altogether. At the same time, they've been attacking union workers and teachers, trying to place the blame on them. And they've deliberately worked to sabotage our economy (remember that debt ceiling fiasco?), because it's to their advantage politically if our economy does not improve.

But it's even worse than that. Past Republican presidents have packed our Supreme Court with far-right fanatics, and last year, they overturned long-standing precedent to let corporations spend money on political campaigns. Now, wealthy corporate CEOs can spend unlimited amounts of other people's money (your money, if you own mutual funds in your retirement plan) to elect politicians who'll give them tax breaks.

Yeah, they don't even have to spend their own money to buy politicians these days! Not only that, they can do this all anonymously. This can be kept a complete secret from both the shareholders (remember, this is supposed to be their money) and the corporation's customers alike.

You couldn't design a better system for encouraging political corruption if you tried. And these right-wing fanatics are on the Supreme Court for life! This is what we've brought on by electing Republican presidents and congressmen.

Is it any wonder than these protesters are angry? We should all be angry. But angry isn't going to help. We need to become politically active. We need to vote. We certainly need to vote against the Republicans who've brought us this mess. And if the Democrats are too timid to fight back, we need to get new Democrats in office.

PS. Seriously, like it or not, we are a two-party system. We're not like European countries which have a parliament. Third parties make no sense here. They just ensure a win for the party you like the least. Even our right-wing loons were smart enough to see that. Instead of starting a third party, they just took over the Republican Party.

Well, that's exactly what we progressives need to do. If you don't like the Democrats - and there's a lot not to like - then change them. It's really our only option.

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