Income inequality may be here to stay

Once an animal knows what it’s like to run free, it’s never happy to be tied up again.

That pretty much sums up the problem America faces when it comes to the growing wealth of the wealthy and the shrinking middle-class.

Former president Ronald Reagan began lengthening the leash of corporate America more than 3 decades ago. The most notable event is perhaps the breaking of the air traffic controllers union. The message sent was clear. Workers’ rights matter less than corporate profits.

So it began and so it continued with the presidents that followed.

Bill Clinton got rid of the Glass-Steagall Act of 1933, a law that kept commercial banks from using depositors’ funds for risky investments.

George W. Bush came in behind Clinton and cut even more of corporate America’s leash. Bush added a cookie on top, with two massive tax cuts that made the rich even richer, and ultimately exploded the US federal deficit.

In the years following multiple levels of deregulation on corporate America, income inequality has spread like a disease. Low wages and lack of opportunity are now trapping more than 50 million Americans in poverty.

When Barack Obama took office in 2009, he did little to repair what the previous administration had done to damage the middle-class. Although he was successful in lifting the Bush tax cuts on higher income Americans in 2013, it hasn’t changed the fundamentals of the economic disparity.

The Daily Beast notes, “Our national conversation now is dominated by the voices of the small, thriving minority…Perhaps the economy has been bad enough for long enough that its expiration date for news has expired, one more sign this terrible reality is the New Normal.”

To say that the rich have the American economic system rigged may be an understatement. In the 2009 documentary, “Capitalism, A Love Story,” award-winning filmmaker Michael Moore explains how to the collapse of the U.S. economy, brought on by  deregulated Wall Street greed, was a “financial coup d’état.”

Looking back at the taxpayer bailouts of America’s banking industry, it’s hard to refute Moore’s claims. The big winners in the years following the TARP bailouts have been the banks. JPMorgan and Wells Fargo, along with the rest America’s biggest banks, continue to post record profits.

The New York Times points out just how bad income inequality has gotten in the U.S.

“NEW statistics show an ever-more-startling divergence between the fortunes of the wealthy and everybody else….. 

In 2010, as the nation continued to recover from the recession, a dizzying 93 percent of the additional income created in the country that year…went to the top 1 percent.”

Yet for American workers, opportunities for upward mobility continue to sink. According to a Bureau of Labor Statistics report issued on March 28, 2013, there are more jobs available in the U.S., but “average weekly wages declined.”

Another reason to run away from supply-side economics

Conservatives have been running on the economic theory that if the rich get richer, their extra money trickles-down to everyone else. But according to the exact opposite is true. The economy gets better when the poor get richer.

On Tuesday, Venture capitalist Nick Hanauer told Ezra Klein, on MSNBC’s ‘The Last Word,:

“This idea that if we just keep squeezing workers at the bottom, that somehow we’ll get more prosperous is obviously, categorically untrue. Look, if there was a truth to any of these arguments, given how rich  the rich have gotten for instance, given how profitable corporations have gotten in the last 10 years, we would be drowning in jobs and prosperity. It’s the opposite of true. The way you animate prosperity in a capitalistic economy is by raising the bottom and using the surpluses.”

A look at historical economic data shows that Hanauer is right on the money. At times when the income inequality gap shrinks, the country experiences an economic boom.

The concept of tying higher wages for workers to economic growth goes back to early in the last century, when automaker Henry Ford said his employees needed to make enough money to buy the products they made. By doing so, it expands to buying-power of consumers and expands the middle-class.

But what’s been happening in America over the past 30 years or so, is businesses have been blaming wages for reduced profits. In turn, they have cut workers’ pay, which gives them less money to put back into the economy. 

Hanauer calls it, “a death spiral of falling demand.” 

At some point, there are not enough people left with enough money to buy any of the products their bosses make. When demand stops, the top economic tier also comes tumbling down.

The theory of trickle-down economics is not only unsustainable, it’s a ticket to economic collapse.

For some reason, this rather obvious concept has been lost on American voters who continue to election conservatives who are destined to completely collapse the economy with supply-side theory. By implementing ever-more drastic policies that widen the gap between rich and poor, they erode the buying power of America’s economic engine which at some point, brings it to a complete halt.

If every person in America today could afford to live in a comfortable home, buy a new car every three years, send their kids to college, and retire with enough money to maintain their lifestyle, the US economy would be thriving and the federal deficit would be history.

America is letting vulture capitalism rule government policy, instead of the other way around, and everyone but the super-rich are suffering for it. However, their day will also come if they are allowed to squeeze the buying-power life out of their workers.

The best way to grow the economy and create jobs is to give the poor the opportunity to become the middle-class. 

With trickle-up economics, the more money everyone has to spend, the more money everyone makes. The logic is impeccable. But convincing the rich to part with their money for the good of the nation is as foreign in America today as the jobs CEO’s ship overseas in their quest for cheap labor. They are creating their own doomsday and don’t appear to be smart enough to know it.

Video: The inequality dragon must be stopped

 

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