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Economic Inequality in America: Transfer of Wealth- Part 1

January 30, 2019

Economic Inequality in America: Transfer of Wealth- Part 1

Income inequality refers to the extent to which income is distributed in an uneven manner among a population.

U.S. Economy

American freedom, liberty, entrepreneurship, and the belief that any individual in the United States possesses the ability to succeed in life with the proper amount of will, sacrifice, dedication, determination, and work ethic, separates and distinguishes this free country from others in the modern world.

The freedom to innovate and take risks without the threat of punishment from the central government; to seek knowledge and truth over ignorance and vice; to make decisions and face the consequences of your actions; to create and walk the path of your own will, without the common political and religious barriers or forces from past human history, compelling you towards a specific area of study; to feel protected from the safety, security, technology, healthcare and education of an advanced and industrial nation.

These opportunities, among others, provide the foundation for Americans to move forward towards a better future that they build for themselves. They represent fundamental principles and rights bestowed upon Americans from the very inception of the United States. Yet the past 50 years shows the abandonment of these values by a government and an economy infected with corruption, bribes, and the manipulation of the political and financial system from billion-dollar corporations with a vested interest in attacking and suppressing the free market to protect their own capital, assets, and resources.

The two fundamental principles of a free and capitalist society, freedom of enterprise and free-market innovation, have been co-opted by major corporations and powerful monopolistic industries that corrupt the government to discourage entrepreneurship, which represent competition, and with policies that raise the prices of goods on American consumers. These policies- written by corporations and crafted by a government no longer controlled by the people, but compelled from corporations that pay billions of dollars a year to buy off politicians that rewrite the laws that protect corporations over the general public- creates and exacerbates economic inequality on levels not seen since the Great Depression.

The United States stands as the largest and wealthiest economy and the most successful country that the Earth has ever known, due to the freedom, opportunity, and liberty that many, not all, Americans enjoy.

In terms of the economic system, the United States uses certain aspects of both capitalism and socialism, to create what is called a mixed economy, which means that the government plays a limited role in some areas of the free market to allow for invention without interference so that technological and medical innovation may expand and improve; also freedom of choice determined by supply and demand and not by government compulsion. But a mixed economy also contains a government that intervenes in other areas to protect American citizens from dangerous and reckless corporate behavior and to achieve a higher social good, with programs that protect the elderly, the poor, the sick and the young. This economic freedom and protection for American citizens provides individuals with greater opportunities to succeed and thrive in health and wealth.

A capitalist society encourages competition to achieve overall growth and places the power in the hands of the consumer. Individuals- not the central government- control the factors of production and possess the freedom of choice to vote with their dollars for products and services that they feel represent their interests and needs, which allows for the development of healthy competition to raise the quality of goods and services over time. A capitalist society protects private property and encourages entrepreneurship from all income levels of society in order to raise the standard of living and quality of life for all citizens.

In a mixed economy, prices on goods and services fluctuate in accordance with supply and demand; most transactions are not restricted or compelled by the State. A capitalist society, however, taken over by greedy, amoral, faceless corporations, may turn predatory where companies exploit people, damage the environment, and harm consumers for the sake of profit and growth at all costs. A predatory-capitalist society of this disposition may cause profit, capital, and resources to accumulate within a small group of people and corporations that use their wealth and power to manipulate the social, political, and financial system for their own benefit, to the detriment of American consumers.

Corporations with greater wealth and resources possess the power to control and dictate the economy to protect their interests; and also act out of self-preservation when they feel threatened by competition or by federal laws and regulation, intended to protect the health and safety of the public, which may interfere with their profits. When corporations attack the capitalist free market and prevent competition from entering the system, then monopolies form; when monopolies form, prices increase and the quality of goods and services decreases as competition diminishes. Corporations then act with reckless disregard for society and with careless and destructive actions that harm the environment. This cycle of political corruption, corporate manipulation of the laws that protect the public, and destructive corporate behavior continue until fundamental human rights shrink and the quality of life for the American population diminishes.

The United States adopts socialist policies in order to protect people and the planet from this reckless corporate behavior. Socialism seeks to advance the public good by protecting worker’s rights and the public ownership and control of services that benefit the community as a whole and improve the health and safety of society such as the police force, firefighters, public education system. Social safety net programs, such as Medicare, Medicaid, the Supplemental Nutrition Assistance Program (SNAP), Social Security, subsidies for college education, provide Americans with assistance to pull themselves out of poverty with funds to pay for the basic necessities to survive in an increasingly complex and expensive society.

But as you will see, these socialist policies- intended to protect the general public from predatory corporations- are now favored by these same corporations that turn to the government for subsidies, freebies, handouts, bailouts at the expense of American taxpayers, who pay for the failure of companies that take risks knowing that the government will step to protect their losses, as the $9 trillion taxpayer-funded financial bailouts after the banking collapse of 2007 shows.

This corporate socialism contradicts the very foundation and principles of the free market capitalism and competition that the United States was founded upon. When a government intended to be of the people, by the people, and for the people is stolen by politicians and given to corporations- which American citizens subsidize- faith in democracy erodes and trust in the institutions that Americans rely on diminishes, leading to a general dissolution of democratic principles, loss of public integrity and virtue, and the rise of nationalism, tribalism, and xenophobia.

Unemployment Rate

The unemployment rate reached 3.7 percent at the end of 2018, the lowest rate since 1969. But low unemployment rates do not signify prosperity and wealth for the entire population. Newly created jobs are often in the part-time, low-skill, low-pay, no benefits or paid leave job sector; and the low unemployment rate does not account for the number of individuals that have stopped looking for a job. Many qualified and college-educated Americans may find it difficult to find a job that meets their level of knowledge and skills; they may abandon the poor job market entirely rather than accept one of the many newly created low-skilled, low-paying, part-time jobs. The unemployment rate does not account for these types of individuals that have left the job hunt. The mainstream media sensationalizes, as usual, and politicians latch onto low unemployment numbers in order to cushion their resume and lack of success in improving the economy. A real indicator of unemployment rates would factor in the type of newly created jobs and whether or not they offer the healthcare, benefits and proper wage compensation that a full-time job offers.

Economic Inequality

Wealth: The value of a households property and financial assets minus the value of its debt.

An American middle class with high purchasing power through proper wages, compensation, and benefits represent the most important piece in a healthy and successful economy. Consumer spending drives economic growth, which generated $12.6 trillion in 2017, 70 percent of all economic growth. In times of wealth, economic growth, communal happiness, and prosperity, income and overall wealth increase as worker productivity improves. The entire working population contributes to the success of the economy, and shares in its failures during times of low worker productivity; but as worker productivity in society improves, so should employee compensation.

The super-wealthy that make a majority of their profits through passive income- such as capital, investments, stocks, and speculation- are known as the idle-rich, and often invest that money further where it never enters the flow of the regular economy, which heightens and perpetuates the myth of trickle-down economics, as this money remains in the small circle of wealth of the top of the American economy.

The middle class spends most of what they earn, contributing to the growth of the economy and improving the livelihood of small business owners, which elevates the whole of society and its members over time. A large and thriving middle class signifies economic mobility and social progress, the place where the American Dream is realized for many as opportunities for success and growth increase. A large middle class acts as a buffer between the wealthy and the poor.

In times of economic inequality, with a diminishing middle class and with greater numbers of people suffering in poverty, the buffer between rich and poor dissolves, which leads to anger, resentment, class warfare and possible rebellion against the corrupt social, political and financial system that suppresses income and oppresses the economic growth and social improvement of large portions of the population. This inequality of compensation acts as a form of strategic poverty by those in power: Keep the poor and middle-class population wealthy enough to get by with relative happiness to prevent social unrest, but poor enough to fall into the trap of the corrupt political and economic system that appears too complex, corrupt, and infected to understand. This perceived hopelessness represents- for the wealthy political and corporate class- a feature of the social system that discourages and demoralizes the poor and middle class as the issues and policies infecting the system with bribes, manipulation, and corruption appear too massive and systemic to change.

When a large demographic of people cannot pursue their dreams, ideas, and aspirations as free Americans because they do not possess the time, nor the finances, nor the energy after working two or three jobs, and are saddled with student loans and massive soul-crushing debt, the world is robbed of a valuable asset in the progress of the human species, as poverty-stricken Americans must focus the majority of their time on acquiring the basic necessities for survival, rather than on contributing unique and creative ideas to improve society.

Our current system of rampant and ubiquitous inequality throws the economy into a vicious cycle of the poor getting poorer, as corporations hoard the financial means and resources to accumulate greater sums of money, away from the regular economy. The poor struggle to gather the basic minimum amount to pay for the rising cost of healthcare, food, water, shelter, transportation, and education. This income inequality contributes to slower economic growth, lower economic mobility, and higher levels of debt, which means greater amounts of people’s paychecks going to pay off that debt each month.

The general increase in prices in society, over time, is known as inflation, which occurs when federal economic policies increase the amount of money in circulation. As the cost for the basic necessities for survival increases, but worker’s wages remain stagnant, greater amounts of the population will be unable to afford the products and services that they acquired with relative ease in the past. In 2008, for example, the beginning of the recession, worker’s wages increased by 3.7 percent, but the actual real wages decreased by .8 percent due to inflation, which means that the increase in worker’s wages was lower than the increase of the cost of goods and services in society.

Real wages measure the purchasing power of a families income in connection with inflation. If inflation increases at a greater rate than worker’s wages, then wages alone will not be enough to pay for the basic necessities. When this occurs, the poor and middle class must borrow and take on greater sums of debt through loans and credit cards to afford the rising costs of healthcare, food, housing, and transportation. This creates a society of debt and dependency on the system of government that allows this inequality to occur.

For the poor and middle class, the combination of low wages and inflation acts as a form of a cruel capitalist tax implemented by the wealthy political and corporate class to survive in the game of American society. As the poor and middle classes accumulate greater amounts of debt to survive, they are forced to dedicate greater amounts of their income towards paying off this debt; as greater amounts of income go towards debt payments, less money enters the flow of the economy through consumer purchases. This cycle leads to a general decrease in economic growth and mobility for the whole of society and lower standards of living for the poor and middle class.

According to the CIA Fact-book, the United States has the fortieth highest level of economic inequality out of 150 countries reported, near the same level as Jamaica, Peru, and Cameroon. A Congressional Budget Office study found that between 1979-2007, household income increased by 275 percent for the wealthiest one percent of American households and increased by 65 percent for the top one-fifth of earners. The bottom one-fifth saw an 18 percent increase (after subtracting all taxes and adding all income from social security, welfare, and other social payments). During this same period, the share of total after-tax income received by the top fifth of the population increased by 10 percent (mostly for those in the top one percent), while the share of income received by the bottom four-fifths decreased by two-to-three percent.

Income Disparity from 1970-Today

The transfer of wealth from the poor and middle class into corporate profits and capital begins with economic and political policies around the year 1973. The bottom half of the American population saw their share of income drop from 21 percent in 1980, to just 13 percent today; while the top one percent saw their share of income increase from 11 percent in 1980 to over 20 percent today. Since 1979, before tax incomes of the top one percent of American households have increased more than four times faster than the bottom 20 percent of households.

Alan Krueger, Obama’s Chair of Economic Council, wrote that the significant shift in the share of income accruing to the top one percent over the years of 1979 to 2007 represents nearly $1.1 trillion in annual income. A study by finds that the top 10 percent of American households own an average of nine times more wealth than the bottom 90 percent; the top one percent owns an average of 40 times more, and the top 1 percent owns an average of 198 times more than the bottom 90 percent of American households. This massive level of inequality of compensation is a result of federal policies written by corporations and handed to politicians on top of blank checks to politicians reelection campaigns.

According to the World Inequality Report, from 1980 to 2014, the bottom 20 percent of the population in the United States saw a four percent increase to their incomes (not enough to account for the increase in the cost of goods and services from inflation); the top ten percent doubled their incomes over this 34 year period; the top one percent tripled their incomes; the top .001 percent saw a 600 percent increase in their post-tax income. This type of wealth inequality limits social mobility, a major part in the pursuit of the American Dream; is a threat to the foundation and principles of American democracy, as only a few wealthy people control the outcomes of elections, system of government, and direction of the economic system; and hinders social and financial progress from all levels of society.

Minimum Wage

The first minimum wage laws were implemented as part of Franklin D. Roosevelt’s, New Deal, in response to the corruption that lead to the stock market crash and the subsequent Great Depression during the 1930s. The national minimum wage remained at $5.15 an hour from 1995 until 2007, when the amount increased to $7.25, where it remains today, which means that the country has now passed 10 years without a minimum wage increase. One-quarter of the American workforce makes less than $10 per hour.

Minimum wage laws prevent employers from exploiting workers and should be high enough to align with a living wage, meaning that the minimum wage increases as inflation increases in order to meet the rising costs of society (food, healthcare, housing, education). Yet the national minimum wage has not kept pace with inflation; if it had, then the national minimum wage would be $11.76 an hour instead of $7.25; if minimum kept pace with productivity growth, the wage would be $19.33; if the minimum wage kept pace with executive pay, the national minimum wage would be $23 an hour. When adjusted for inflation, today’s minimum wage is worth less than it did 50 years ago.

Causes of Economic Inequality

Americans must recognize that the interests of a corporation, stand in contrast to the interests of a nation in a predatory capitalist society; and the side with the largest share of money possesses the financial means to dictate the direction of the country. The rise of corporate profit, control, and power over our political system, over our economy, and over the health and happiness of our sociocultural life creates and exacerbates inequality on systemic levels.

Many complex factors contribute to the rise of economic inequality in the United States, which can be traced back to the early 1970s, when the rate of productivity and worker compensation first began to diverge from one another, and the pay of CEOs and profits of corporations began to increase. During this period, the United States transitioned from a labor and manufacturing intensive society with a focus on productivity, national economic growth, strong workers unions, collective bargaining rights for workers to demand changes and pay raises from employers, into a capital intensive society, where profits are made through stocks, investments, trades, real estate, Wall Street speculation.

  • The advancement of technology improved the rate of productivity for the workforce, but also replaced many jobs with robots that could do many tasks with more efficiency and effectiveness than human beings, a process known as automation.
  • Trade policies by national governments in the 1980s and 1990s, like the North American Free Trade Agreement (NAFTA), shipped many corporate and manufacturing jobs overseas, to countries that pay workers pennies compared to what Americans earn for similar work, known as globalization (the United States has lost 20 percent of its manufacturing jobs since 2000).
  • The decline of educational inequalities across the globe, which means that more individuals in poorer countries now possess the intellectual tools and knowledge to enter the global workforce.
  • Changes to the tax policy, which takes workers pay and pushes it into corporate profits and CEO compensation, where profits are earned on capital gains, investments, and stock options and are taxed at a lower rate than labor.
  • The decline of labor unions, leading to a decline in collective bargaining rights and political influence from the regular workforce, which gives corporations and CEOs more power and control over their employees.
  • Political policies that increase inflation, but depress workers compensation to remain stagnant and minimum wage to remain below a living wage;
  • Ideological, political, and social policies, like neoliberalism and corporatism, which gives corporations greater power and control over the economy and over politicians; the corrupting influence of money from corporations and their lobbyists over the political system, who use their private corporate earnings, that American citizens do not share, to buy off politicians in federal elections, who then write new laws and change old policies that influence the entire population.

This issue of private, corporate sector influence over the publicly owned and controlled federal government represents the most prominent and corrupting issue affecting Americans today. Private ownership of the public government- which no longer represents the interests of the average citizen, but rather, represents the interests of the corporations that pay the most money- infects our society and exacerbates economic inequality by dividing the country and the economy into two competing forces vying for the attention and recognition of elected officials. The wealthy, corporate class possesses the financial means to influence, own, and control the politicians that the regular American citizens elect. The significance of one person, one vote carries no meaning within a parasitic system that feeds off of money, grows, and becomes more powerful as financial bribes, corruption, and influence replace democratic values and principles.

What purpose do voting and democracy garner in a free society if the population does not understand the truth behind the system that oppresses them? Nor the corporations and politicians that perpetuate the corrupt and pre-determined voting system that the general public ignorantly and willingly accepts as an inevitable outcome of an archaic, entrenched, and established American democracy? Our voting patterns will not change the plight of the people unless we execute more direct action and involvement in the sociopolitical process and rejection of the same status quo politics of private corporate influence over our public democracy.

The corporate class lives in the world of capital, stocks, and investment, which continues to improve. A majority of their new wealth comes from speculation and on capital gains, which is taxed at a lower rate than some middle-class income brackets, who earn all or a majority of their profit from labor. The poor and middle class live in the world of productivity, wages, and consumption, which continues to decline as automation, globalization, and other factors that contribute to economic inequality drive a wedge between the corporate and the labor class. Two different sets of rules for different classes of people.

So long as private money drives public elections, public officials will work hard to protect that private money.

Lawrence Lessig

The United States is the only advanced economy on Earth without a labor-based political party to stand up for worker’s rights and influence federal elections in favor of workers. The current political system of hyper-polarization-partisan-politics ignores the majority of the country and focuses on the fringe groups that occupy the far ends of the political spectrum in order to manipulate them with political platitudes, lies, and propaganda to steal their votes. The Republican and Democratic parties identify themselves by different names and superficial ideologies but have represented the same corporate interests since the 1970s.

On the surface, the two parties appear to disagree on partisan social issues like abortion, Second Amendment rights, gay marriage, other ridged ideological social class beliefs; but behind the sociopolitical veil, with the assistance of propaganda artists in the mainstream media, they are funded by the same corporations that donate to political campaigns to purchase influence. Political disagreements sow discontent in society, which the mainstream media reports on and expands as a way to distract the population from the real issues- like political campaign finance corruption and economic inequality- that affect all members of society.

Labor Unions

The decline of labor unions over the past 50 years represents a significant factor in the growth of economic inequality, as larger numbers of American citizens no longer possess the bargaining rights and political influence to demand changes from politicians and corporate employers. Fewer workers unions equal less pressure on employers to raise wages; greater likelihood of worker termination; poor benefits and wage distribution; less pressure on politicians to enact labor and worker-friendly policies. The decline of labor unions and the rise of corporate executive compensation directly coincide.

The share of unionized workers dropped from 30 percent in the 1970s to around 10 percent today; this coincided with an increase in CEO pay from 40 times as much as the average worker in 1970, to 350 times more than the average worker’s compensation today. This power grab from the wealthy-corporate class takes advantage of systemic government weakness, underfunded public institutions and elections, and of politicians, who resemble the behavior of puppets or parrots more than that of actual legislators or human beings with their own unique and individual thoughts.

Citizens United

The corporate capture of the federal government culminated in 2010 with the Supreme Court decision in Federal Election Commission (FEC) vs. Citizens United (a conservative non-profit organization). The Supreme Court decided in favor of Citizens United in a ruling that said that the free speech clause of the First Amendment prohibits the government from restricting independent expenditures for communications by non-profit corporations, for-profit corporations, labor unions, others. This means that the government cannot prevent individuals or corporations from donating unlimited amounts of money to political campaigns, as long as those donations do not directly fund the politician’s campaign, an arbitrary and ambiguous distinction. In order for a corporation to purchase a politician’s influence, they must donate to a Super PAC (Political Action Committee). This PAC represents slush funds of dark, unsourced, and unregulated money with the intention of electing a specific politician.

If money signifies free speech than a corporation’s free speech is more valuable than individuals; a billion-dollar corporation owns more free speech than a small business; a hedge fund manager possesses more free speech, which means more freedom and more rights, than a teacher or retail worker. Some people and corporations own more money, which means greater freedom of speech than others. To say that money signifies free speech is like denying a sick person the right to voice their opinion because someone of better health is more suited to provide a solution to the issues. Sure the person with poor health and the person without a savings account may represent a large share of the population, but the person of sound health and the corporation with the most money provide greater opportunities for the corrupt system of influence to grow and the power of politicians that create the system to increase. This is systemic inequality at the highest levels and far from the democracy and the type of government that the founding fathers intended.

There is nothing more unequal than the equal treatment of unequal people.

Thomas Jefferson

An equal and fair democracy would mean an equal ability to donate the same amount by all individuals and corporations so that politician’s ideas and beliefs are based around their actual knowledge and understanding about the world and not based around the demands of the highest bidder. Elevating the free speech of corporations inevitably degrades the free speech of the poor and middle class. This creates disdain for the poor and the middle class that does not possess the financial means to participate in the democracy that every American citizen plays an equal role in. In a society that values money over democratic principles, integrity diminishes, and faith in democracy erodes.

The Citizens United decision solidified two previous, but lesser-known, Supreme Court decisions that set precedents for campaign finance. Buckley vs. Valeo (1976) stands as the first case to allow private, independent spending of billions of dollars on political campaigns, as limits on the amount of spending infringe on American’s free speech rights. Two years later, the Supreme Court decided in, First National Bank of Boston vs. Bellotti, that the value of free speech does not depend on the identity of the speaker, the speech of individuals and corporations must be treated the same; a restriction of corporate donations to political campaigns would mean a restriction of that corporation’s free speech, according to the Supreme Court.

Student Loans/Debt

After the counter-culture movement of the 1960s, where the first generation of young, college-educated adults used their newly acquired knowledge to refuse the governments corruption and the illegitimate war in Vietnam, coincidentally or not, the price of higher education slowly increased and its purpose changed from educating the youth, into a business that enriches corporate lenders and the government, which loan money to children at high-interest rates and a low likelihood of repayment as the job market continues to shrink, making it more difficult to pay off the enormous loans.

The price of a college education discourages many intellectually capable students from pursuing a degree, and places a financial burden over those that do in what appears as a cruel form of tax or punishment for pursuing knowledge; and as a students debt increases, they are less likely to take risks in becoming an entrepreneur by starting their own business, as doing so may put the student at an even greater risk of crippling and perpetual debt for the rest of their lives.

Over 44 million Americans owe a combined $1.5 trillion in student loans (1 in every 4 American adults). 70 percent of college students graduate with a significant amount of debt and enter into a workforce and an economy with few job opportunities than a college education promised in the past. The average student loan borrower owes $37,172, which is the same as a 20 percent down payment on a $185,000 home; a 10 percent down payment on a $370,000 home; a brand new car paid in full; or start-up costs for a business. The rise of student loan debt coincides with a drop in homeownership overall, as younger generations find themselves struggling to pay for what older generations could afford to pay for without a college education. As more young Americans- saddled with student loan debt- put off buying a home, the housing market may falter and crash from an entire generation unable to afford a home. Part 2

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