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Tuesday, October 11, 2011

If Top 1% Hadn't Ripped Off Trillions, You'd Likely Be Making Thousands of Dollars More Right Now

AlterNet.org

ECONOMY
The Occupy Wall Street movement is out to focus the nation's attention on decades of increasing inequality.

Photo Credit: Steve Rhodes
The corporate media appear to be obsessed with the idea that the Occupy Wall Street movement doesn't have a cohesive message. Of course, that misses the point: as Nathan Schneider wrote in Yes! magazine, “More than demanding any particular policy proposal, the occupation is reminding Wall Street what real democracy looks like: a discussion among people, not a contest of money.”

And despite the handwringing about the movement's supposed lack of focus, it does have a simple-to-understand message that fits neatly on a bumpersticker: "We Are the Other 99 Percent."

Contained in that simple message is an implied demand, whether or not people recognize it: undoing several decades of increasing inequality in this country.

Economists Thomas Picketty and Emanuel Saez sliced and diced America's income going all the way back to 1913, and their results tell us exactly what the Occupy Wall Street movement is about, at least in broad terms.

Choose a year from some fondly remembered past when the American economy generated broadly shared prosperity. How about 1947? That year, the top 1 percent of U.S. households grabbed a bit less than 12 percent of the nation's pre-tax income, and the other 99 percent shared around 88 percent of the take. It wasn't a perfect time, but it was an era when a large middle-class was emerging.

Or maybe you think 1967 was a great time to be an American worker. That year, the top 1 percent grabbed 10.7 percent of the pile, and the other 99 percent divvied up around 89 percent of our income.

Between 1949 and 1979, those at the top never took in more than 12.8 percent of the total. When Ronald Reagan was elected in 1980, they grabbed 10 percent of our economic output, and the rest of us shared 90 percent. And that's when things started to shift, relatively rapidly. In Reagan's final year in office, the top 1 percent of American households grabbed 15.5 percent of the nation's income.

By the time George W. Bush was elected, they were taking in 21.5 percent. And in 2007, the year before the crash, they were pulling in 23.5 percent of our pre-tax income, leaving the other 99 percent to share just 76.5 percent of the fruits of our output.

According to Paul Buchheit, a professor with City Colleges of Chicago and founder of fightingpoverty.org, “if middle- and upper-middle-class families had maintained the same share of American productivity that they held in 1980, they would be making an average of $12,500 more per year.” The size of our economy, he wrote, “has quintupled since 1980, and we all contributed to that success. But our contributions have earned us nothing. While total income has also quintupled, percentage-wise almost all the gains went to the richest 1 percent.” This upward redistribution of wealth “translates into a trillion extra dollars of income every year for the richest 1 percent.”

There are two things that are vitally important to understand about this. First, those at the top of the ladder aren't any more virtuous, intelligent or hardworking than they were 30 years ago, and this didn't happen by accident. Some part of it may well have resulted from technological innovations, but the lion's share of that shift resulted from specific policy changes that the corporate Right fought hard to enact.

It resulted from the emergence of international trade deals that facilitated offshoring much of our manufacturing base, changes in labor laws and enforcement that cut the unionized share of the American workforce in half, and a shift in priorities at the Federal Reserve that led it to concentrate far more on keeping inflation in check than keeping working America employed.

As a whole, the United States remains a prosperous country, but the economy isn't working for people who make most of their income by working – the share of the nation's income going to wages hit an all-time low last year, while the share going to corporate profits was at an all-time high.

The other crucially important point is that this isn't just about fairness, and those of us who talk about this massive redistribution of wealth aren't just “sore losers,” as conservatives often contend. There's a practical issue here: the economy simply doesn't function well when working America is taking home less than half of our national income in wages.

About two-thirds of our economy is driven by consumer spending, and studies have shown that unlike ordinary people, when the very wealthy get a tax break, they don't spend more money as a result. They bank it. The other 99 percent are consumers, but having seen their incomes stagnate for three decades, they're tapped out, up to their eyeballs in debt and unable to maintain the demand that the economy requires to keep people working.

Lack of demand, rather than some nebulous sense of “uncertainty” on the part of business leaders, is our core problem, so when the top 1 percent double their share of the take, they are, as I wrote back in July, simply killing American jobs.

Obviously, understanding this doesn't lead to a manifesto or a polished 10-point plan. But this staggering redistribution of wealth is reversible, and the Occupy Wall Street movement is beginning a national conversation on inequality that has been sorely lacking in our discourse. As Nathan Schneider noted, that conversation is taking shape “offline, in a physical, public space, live and in person.” That, he writes, is “where the occupiers are assembling the rudiments of a movement.”

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