Remember Your Salary Doubling? Oh Wait...

Brace yourself. In coming weeks you’ll hear there’s no serious alternative to cutting Social Security and Medicare, raising taxes on the middle class, and decimating what’s left of the federal government’s discretionary spending on everything from education and job training to highways and basic research.

“We” must make these sacrifices, it will be said, in order to deal with our mushrooming budget deficit and cumulative debt. 

But most of the people who are making this argument are very wealthy or are sponsored by the very wealthy: Wall Street moguls like Pete Peterson and his “Fix the Debt” brigade, the Business Roundtable, well-appointed think tanks and policy centers along the Potomac, members of the Simpson-Bowles commission. 

These regressive sentiments are packaged in a mythology that Americans have been living beyond our means: We’ve been unwilling to pay for what we want government to do for us, and we are now reaching the day of reckoning.  

The truth is most Americans have not been living beyond their means. The problem is their means haven’t been keeping up with the growth of the economy — which is why most of us need better education, infrastructure, and healthcare, and stronger safety nets.

The real median wage is only slightly higher now than it was 30 years ago, even though the economy is twice as large.

The only people whose means have soared are at the very top, because they’ve received almost all the gains from growth. Over the last three decades, the top 1 percent’s share of the nation’s income has doubled; the top one-tenth of 1 percent’s share, tripled. The richest one-tenth of 1 percent is now earning as much as the bottom 120 million Americans put together.

Wealth has become even more concentrated than income (income is a stream of money, wealth is the pool into which it flows).  

The richest 1 percent now own more than 35 percent of all of the nation’s household wealth, and 38 percent of the nation’s financial assets – including stocks and pension funds.

Think about this: The richest 400 Americans have more wealth than the bottom 150 million of us put together. The 6 Walmart heirs have more wealth than bottom 33 million American families combined.

So why are we even contemplating cutting programs the middle class and poor depend on, and raising their taxes?

We should tax the vast accumulations of wealth now in the hands of a relative few. 

To the extent they have any wealth at all, most Americans have it in their homes – whose prices have stopped falling in most of the country but are still down almost 30 percent from their 2006 peak.

Yet homes are subject to the only major tax on wealth — property taxes.

Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets.

They figure it would generate $70 billion a year, or $750 billion over the decade. That’s more than the fiscal cliff deal raises from high-income Americans.

Together, the two sets of taxes on the wealthy — tax increases contained in the fiscal cliff agreement, and a wealth tax such as Ackerman and Alstott have proposed — would just about equal the spending cuts the White House has already agreed to,totaling $1.5 trillion (or $1.7 trillion including interest savings).

That seems about right.

 

Comments

So why are we even contemplating cutting programs the middle class and poor depend on, and raising their taxes?

Well, for a couple of reasons. First, entitlements represent a basic social contract that were sold to the people, with specific conditions. You pay into the system, and in return, you are guaranteed a minimum level of security when you are old or disabled. Seems fair enough. The fact that the model sold to the people no longer works, represents a failure of government, and a failure of the contract. To abandon the contract, and penalize those who had nothing to do with its failure by confiscating their wealth, in order to achieve ends that the contract was never meant to achieve in the first place, would erode the legitimacy of the government, and erode the legitimacy of the programs.

Second, think about the precedent that would set and the economic system it would create. Imagine that economic equality is the government's guiding principle, and wealth confiscation is it's chief means of achieving it. So the government confiscates some wealth from some, and gives to others in order to reduce inequality just a little bit. The wealthy will put their remaining capital back to work, create more wealth, and inequality will rise again, until it is again redistributed. How long before the many realize that they can tap into the pools of wealth as much as they want, take as much as they want, all in the name of ever elusive "equality"? How sustainable is that system?

Third - and I know this argument is sooo out of style - it's unconstitutional. So there's that.

Look I know it's tempting to look at a big pile of cash that you have no moral or legal claim to and think "Well, I have a gun. Why don't I just take it? After all, it's only fair. He has so much more than me." But can we please, for once, pretend like we live in a civilized society?

First, Social Security Insurance does work. And who has been the main obstacle to its success? The rich. Not happy with looting the working classes pensions and 401(k)s, nor paying their fair share of the social security tax (a percentage tax that is capped for the rich), they wage war to deny the sick and old dignity at the end of work and life.

Second, what government doesn't confiscate wealth? Why not take it from those who benefit from government the most? The ones that can afford lobbyists and to hobnob with our obsequious political and legal class? When the US government had what you would call confiscatory levels of taxation (progressive taxation no less) America flourished and began to tackle problems of race and equality that have dogged the nation from the beginning . A government that only serves one class (and a fraction of the population at that), is not sustainable either.

Third, unconstitutional? How? Congress has the power to tax. Nothing on how to do it. (16th Amendment: The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.)

Moral and legal claim? Is it moral for the Walton familty to have that much wealth and yet pay and treat their employees so poorly and to let government (that is the rest of us) pick up the tab for medical, food, and even housing? Is it moral for vulture capitalists to loot pension funds and drown healthy companies in debt so as to line their own pockets with the sweat of others. This kind of theft isn't even honest as the thug who would stick a gun in our ribs. Legal, maybe. Moral, absolutely not. I know my attitude is civilized and moral, while obviously you think legal is just as good as civilized and moral.

First, if Social Security works, then why is Mr. Reich talking about levying a wealth tax to fix it? I suspect it's because his true aim is not "fixing" Social Security, but rather redistributing wealth. And spare me the claptrap about the evil rich looting the working class. If anything, it's the other way around.

Second, there are like 6 countries that currently levy a wealth tax. So to answer your question, there are about 200 that don't confiscate wealth. And I love that the left's obsession with taxation has become so ingrained, such dogma, that it is the cause of all good. Can you explain to me what exactly higher taxes has to do with race?

Third, yes the wealth tax is unconstitutional. Even its proponents admit it would require a constitutional amendment to levy one. Think about it, if Congress had the power to tax however they wanted, why did we need a 16th amendment in the first place? The 16th amendment wasn't ratified until 1913. Did Congress not tax before that? The answer is that Congress does not have the power to levy "direct" taxes except, thanks to the amendment, on incomes.

Finally, of course it's moral for Walton family to "have that much wealth". They didn't steal it from anybody. They built a store that offers low priced goods, that millions of people frequent, and that millions of poor people depend on. They're not enslaving anyone. Every single person who is working at Walmart does so voluntarily. They want to sell their labor, Walmart wants to buy their labor, and they have settled on a price. If they don't think that price is fair, then they have every right to sell it to someone else.

Oh and did you ever stop to think who those "vulture capitalist's" main clients are? Yep, pension funds.

First, its not claptrap but a fact. What do you think Obamacare is about? Making healthcare cheaper and more available? No, its about enriching the medical and insurance industries. What is the privatization of schools about? Better and cheaper education? No, its about hoovering up $6 billion in revenue for corporations. The rich own the federal and state governments. Who represents the poor or even the middle class? Representative democracy? Bull.

Second, so what. All taxation is a confiscation of wealth. Doesn't really matter what they call it. And when the rich got taxed progressively as after WW2 to pay off the bonds, they didn't have the cash to oppose civil rights or integration as they used to.

Third, read Prof. Reich's latest column. Also, the 16th Amendment gave they that power (to tax income). Duh!

The Walton Family did nothing to earn that wealth, they just happened to be related to the guy that did all the work. The Sherman Anti-trust Act should have shut his business model down long ago as should have unionization, but again, he owned politicians and got his way and has destroyed more jobs and small businesses than he ever created. Your labor argument is not valid since Walmart is not unionized and thus does not have an equal voice on what labor is worth (or don't you believe with Lincoln that labor is the superior to capital).

Pension funds do use vulture capitalists, but are controlled by corporations and not the employees.

Once again Mr Reich misrepresents what is happening. The tax increases are real increases and take effect now, and there are no spending reductions, only decreases in the rate of growth, and they do not take effect until...when? This discussion is all about power and bitterness. Mr Reich is unhappy that their expertise is not held in appropriate regards and they are not deferred by all us uninformed crafstmen.

Average household wealth is $498,000 for all 118 million households. The median is $77,300, in 2010, and the average for the lower-saving 50% is $11,000. See Survey of Consumer Finances, page 17, http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf --
$58.7 trillion is the 2010 total household net worth. 1.2 million households own 38%, that's $18.6 million average among the top 1%. That is 240 times the median. Is the "free market" a truly fair market? It makes one think twice.

Maybe in a perfect world I can see my x-ray technician salary doubled! It is somehow impossible with the financial crisis!

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