Photo: Library of Congress
In November, Americans will have a chance to speak their minds.
And there’s one thing everyone should agree on:
America just isn’t working right now.
It’s not just Americans who aren’t working. It’s America itself, a country whose economy once worked for almost everyone, not just the rich.
In the old America, if you worked hard, you had a good chance of moving up.
In the old America, the fruits of people’s labors accrued to the whole country, not just the top.
In the old America, there was a strong middle class, and their immense collective purchasing power drove the economy for decades.
Over the past couple of decades, the disparity between “the 1%” and everyone else has hit a level not seen since the 1920s. And there is a widespread and growing sense that life here is not fair or right.
If America cannot figure out a way to fix these problems, the country will likely become increasingly polarised and de-stabilised. And if that happens, the recent “Occupy” protests will likely be only the beginning.
The problem in a nutshell is this:
In the never-ending tug-of-war between “labour” and “capital,” there has rarely—if ever—been a time when “capital” was so clearly winning.
And that’s not just unfair.
Let's start with the obvious: Unemployment. Three years after the financial crisis, the unemployment rate is still at one of the highest levels since the Great Depression.
Our 8% unemployment rate, by the way, equates to about 13 million Americans—people who want to work but can't find a job.
And when you include people working part-time who want to work full-time, plus some people who haven't looked for a job in a while, unemployment is at 15%
Yes, the number of jobs has started to grow again, and unemployment's coming down slowly. But we still have miles to go. We haven't yet recovered even half of the jobs we lost in the recession.
Put differently, a lower percentage of Americans are working than any time since the early 1980s (And the boom prior to that, by the way, was from women entering the workforce).
And now we turn to the other side of this issue ... the Americans for whom life has never been better. The OWNERS.
Corporate profits as a per cent of the economy also just hit an all-time high. Profits are now VASTLY higher than they've been for most of the last half-century.
If corporations are doing so well, everyone who works for them should be doing great, right? Wrong. The folks who are doing well are at the top. CEO pay is now 350X the average worker's, up from 50X from 1960-1985.
In short ... while CEOs and shareholders have been cashing in, wages as a per cent of the economy have dropped to an all-time low.
Of course, life is great if you're in the top 1% of American wage earners. You're hauling in a bigger percentage of the country's total pre-tax income than you have at any time since the late 1920s. Your share of the national income, in fact, is almost 2X the long-term average!
It wasn't always this way ... From 1917 to 1981, the bottom 90% of wage earners in this country (blue) captured 69% of the total wage growth. The richest 10%, meanwhile, got 31% of the wage gains.
Between 1981 and 2008, however, things changed. The richest 10% grabbed 96% of the income gains in those years, leaving only 4% for the bottom 90%.
And from 1997-2008, things got grossly unfair. ALL of the wage gains went to the top 10%. The wages of the bottom 90%, meanwhile, declined.
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.
The aggregate tax rate for the top 1% is lower than for the next 9%—and not much higher than it is for pretty much everyone else.
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. (Lower bar). Of course, that's because they also make most of the money. (Top bar).
Remember when we bailed out the banks? Remember WHY we bailed them out? We bailed them out, we were told, so that the banks could keep lending to American businesses. Without that lending, we were told, society would collapse ...
So, did the banks keep lending after we bailed them out? No. Bank lending dropped sharply, and it has yet to fully recover.
So, what have banks been doing since 2007 if not lending money to American companies? Lending money to America's government! By buying risk-free Treasury bonds and other government-guaranteed securities.
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!
And it has helped generate near-record financial sector profits—while the rest of the country struggles with its 8% unemployment rate.
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!
This average Wall Street salary was 6X the average private-sector salary (which, in turn, is actually lower than the average government salary, but that's a different issue).
So, the 1% is doing great, and the 99% are getting the shaft, but maybe the government's stepping in to help everyone ... by building roads or something?
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