- Paul Constant is a writer at Civic Ventures and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In the latest episode, Constant and Hanauer spoke with author and progressive radio host Thom Hartmann about US income inequality.
- Hartmann says raising the tax rate for top earners to over 50% would rapidly stabilise the economy and reduce inequality – and history proves it.
- Visit the Business section of Insider for more stories.
If you were to ask the average American what she’d do if she suddenly had a million dollars, you’d likely hear a wide variety of answers. Maybe she’d finally get a new car, or maybe she’d take a long vacation, or maybe she’d pay for her kids’ college education. Every one of those answers would have something in common: The person answering would want to buy something with their new fortunes.
But when billionaires push politicians to slash regulations or taxes, or to keep the minimum wage below the poverty line, they have a very different reason for wanting to grow their fortunes. Billionaires don’t buy another fancy boat or a new mansion; they can already buy literally anything they want. You don’t accrue billions of dollars because you want stuff â€” you do it because you want power.
How America’s income inequality has widened
For the last 40 years, America’s income inequality gap has widened as the wealthiest among us have added $US50 trillion to their fortunes that used to go into the paychecks of working Americans. And as the fortunes of the wealthiest one per cent of the wealthiest one per cent of the population has grown, so has their power.
When Bernie Sanders ran for the Democratic presidential nomination in 2016, he single-handedly forced the word “oligarchy” â€” defined as a small group of people having power over the majority â€” back into popular usage.
Senator Sanders made the compelling case that a tiny number of wealthy oligarchs have rigged the system in their favour, eroding the rights of the many and fundamentally changing the definition of the American dream to a nation of the wealthy, by the wealthy, for the wealthy. To be poor in America now means you have less freedom â€” less opportunity, less security, worse health outcomes â€” than those with more money than you.
In this week’s episode of Pitchfork Economics, popular progressive radio host Thom Hartmann joined Nick Hanauer and me to discuss America’s centuries-long flirtation with oligarchy, and how we managed to return democratic power to the people in previous moments of crisis.
“We are at the cusp, or close to the cusp, of a major turning point in American history,” Hartmann said. “The question is which way is it going to change.”
The people versus the uber rich
Hartmann’s latest book, “The Hidden History of American Oligarchy,” clearly delineates the battle lines: Either you keep power in the hands of the many â€” a democracy committed to the American founding ideals of life, liberty, and the pursuit of happiness â€” or the state will become more brutal in order to maintain a rigid social order that benefits a small handful of super-rich oligarchs.
“The transition from democracy to oligarchy usually starts with the very wealthy acquiring political power by buying influence with elected officials,” Hartmann wrote in his book, explaining that their influence grows until they “completely control the mechanisms of information” and “their agenda overwhelms the governing agenda.”
“In the final stages,” Hartmann said, the oligarchs “rise up through seemingly democratic processes and take complete or near complete control of government,” smashing the programs that give economic and democratic power to the people and cruelly punishing dissent.
This is not the first time in American history that the wealthy have consolidated power to dangerous levels and America has teetered on the edge of a bloody revolution or an oppressive police state. Massive economic inequality presaged the Great Depression, the Civil War, and the American Revolution, too.
“I feel that we are at that crisis point,” Hartmann said. “If we are well-informed about these lessons of history, we can make it through. If we’re not well-informed, then we end up like Germany did in 1935.”
Hartmann has a simple solution for avoiding the bloodshed that either a revolution or a violent police state would cause: “Raise the top tax bracket up to 90%.” He says even a 70% tax rate on top earners, which was the rate before Reagan came into power, would be meaningful. “Anything over 50% seems to stabilise economies very rapidly and diminish inequality.”
Raising taxes on top earners
By raising the top brackets above 50%, increasing the inheritance tax on large fortunes, and instituting a meaningful wealth tax, Hartmann says income inequality would quickly subside and the balance of power would be restored.
And while oligarchs and their defenders loudly claim taxes on the wealthy will kill the economy, the historical record shows these same solutions have repeatedly worked in America’s past to ease economic inequality, creating a strong economy that worked better for everyone.
Without swift and sweeping action, Hartmann says, the wealthy will seize power here in America. The Trump administration, which sought to rip apart the regulatory state and strip power from democratic institutions like the United States Postal Service, was a trial run for what that oligarchic state might look like, but a more competent politician might be able to sneak a police state past us with the willing assistance of an increasingly consolidated media.
And then? Either an economic crisis, a French Revolution for the 21st century, or another world war are likely outcomes.
Hartmann’s deep historical research has revealed that “these things are self-correcting.” He pauses, then adds, “but the correction process can be brutal.”