Who Stole the America Dream?
Although I just returned from a trip to the Great Smokey Mountains National Park for a family reunion, I’m not going write a travel report. Instead, I’m going to revert back to the category I followed with this blog for a long time —reviewing books that I have read.
In this case, that’s not quite correct. I heard the author of the book by this title, Hedrick Smith, speak today at a public forum in Raleigh. In summarizing his book he presented 32 points that I will try to capture from my unreadable notes:
The recent mortgage fraud moved some six trillion dollars in properties from homeowners to banks and reversed the ownership from 70 percent to 40 percent in the hands of individuals.
All of the tea party talk about high taxes ignores the fact that taxes today are much lower than they were in the Eisenhower and Kennedy era, which was a period of rapid economic growth in the US. A large part of that was due to the ethics of social responsibility of business leaders of that era who didn’t try to grab all of the profits for themselves. As such, their employees became middle class consumers who helped boost the economy. In the 1970’s the middle class exerted their political power, and the 20 million environmental activists forced President Nixon to pass nine major environmental laws creating such agencies as the Environmental Protection Agency and the Occupational Health & Safety Administration. People learned that they had power, and they exerted it politically.
About that time Supreme Court Justice Louis Powell reacted and called 150 business leaders together to create the Business Roundtable. Companies with offices in Washington grew from 175 to 2,455, the number of lobbyists grew to 9,000, and the number of PR staff grew to 8,000. As a result the shift of power was tilted toward business, and in 1978 legislation was passed that structurally changed the economy and the tax code. The IRA’s were created as special legislation for corporate executives as a tax dodge, and then they were extended to everyone as a way to move employees off funded pension plans to self-funded investment accounts thus reducing the corporations’ payroll expenses for pensions from 9 percent to 3 percent. The bankruptcy laws were changed so that instead of a referee doling out the assets, the existing management got the job. Of course, they favored themselves above the creditors, employees and shareholders and made off with the loot. Capital gains tax rates were reduced from 48 to 28 percent resulting that by 2010 the top 1 percent of the most wealthy gained 93 percent of the economic growth while wages remained stagnant.
The United States has the third worst inequality in the distribution of wealth with only Chile and Equador being worse. A 2005 CitiCorp report compared the disparity in wealth in the US between the top and the bottom ranks to that of 16th Century Spain with the very rich and the very poor.
With some 70 percent of the economy based upon consumer demand, the only way to create job growth is to increase demand for products and services again. The tax rates provide less incentive than good wages, which the middle class would use to boost the economy. The very rich can’t spend enough to increase demand for products and services so the only growth has been in high-end companies that cater to that market. Low wages > low consumer demand > low economic growth.
The political system with special interests in control isn’t going to change unless we demand it. The civil rights movement had clear goals that swung the balance of power from those who were the majority and who held near absolute power, but their moral authority brought down the bigots. He offered several points of how the middle class can once again assert their power and bring the economy into a more equitable balance that also will produce more growth for everyone. Occupy Wall Street was an effective protest, but it lacked leadership and specific goals and could not sustain its momentum. We cannot be solely partisan nor anti-business, but the shift in economic power is strangling our economy and must be righted.