Tuesday, July 26, 2011

The Question Conservatives Can't Answer - Why Working Hard in America No Longer Pays, Welcome to Corrupted Capitalism

The Question Republicans Can't Answer - Why Working Hard in America No Longer Pays, Welcome to the Land of Corrupted Capitalism

The following fact was sent to numerous conservative pundits, politicians, and profitseekers:

    Based on Tax Foundation figures, the richest 1% has TRIPLED its share of America's income over the past 30 years. Much of the gain came from tax cuts and minimally taxed financial instruments. If their income had increased only at the pace of American productivity (80%), they would be taking about a TRILLION DOLLARS LESS out of our economy.

And a question was posed:

    In what way do the richest 1% deserve these extraordinary gains?

This question was not posed in sarcasm. A factual answer is genuinely sought. It seems unlikely that 1% of the population worked three times harder than the rest of us, or contributed three times as much to American productivity. Money earned from tax cuts and minimally taxed financial instruments is not productive income. And while some big earners have developed innovative ideas and leading-edge businesses, it seems fair to say that taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health (pharmaceuticals), and the National Science Foundation (the Digital Library Initiative) has laid a half-century foundation for their idea-building.

So I asked anyone out there to explain, defend, or justify the fact that over 20% of our country's income (it was 7% in 1980) now goes to the richest 1% of Americans.

Very few responses were forthcoming. To his credit, renowned economist and writer Thomas Sowell took the time to respond. Unfortunately, his response relied upon classical economic theory: "Most people are paid voluntarily by others to whom they supply goods and/or services, and only to the extent that others value what is supplied enough to part with their own hard cash."

Mr. Sowell is also a believer in economic mobility, claiming that people often move from one earnings quintile to another over time. While there's some truth in this, Treasury Department figures show that nearly 9 out of 10 of those in the top 1% remained in the top quintile of earners over a ten year period.

A few other conservatives responded to my question, with varying degrees of coherence in their arguments. Reference was made to the "Pareto Efficiency," a situation in which an allocation of resources makes at least one individual better off without making any other individual worse off: the result is said to be a net improvement overall. But this does not address the resulting contribution to inequality, which is the main point.

Another respondent claimed: "What we found is that the rich did get richer over the last 30 years, but so did the middle class, the working class and the poorest."

But based on 1980 dollars and IRS data, this is how U.S. income has been redistributed since that time:

    Incomes for the top 1% have gone from $148,000 to $450,000
    Incomes for the next 9% have gone from $46,000 to $50,000
    Incomes for the next 40% have gone from $17,500 to $15,000
    Incomes for the bottom 50% have gone from $5,400 to $3,750

As it stands, the question remains unanswered. Maybe if we offer a prize...?

The very rich take the money of other rich people and use hedge funds to create vast wealth. Other wealthy Americans take a huge share of the value added to products and services by cheap labor to make far more money than any work or intellectual value they added. The first, but especially the second way of keeping wealth and making even more from the mere fact of being wealthy, is a kind of pimpdom. The very wealthy have become pimps who live off the work of others. How fair is it that of all the capital created by labor that the pimps take 75%. It is certainly not the kind of free market society that Republicans say we live in. It is a severely corrupted capitalism that punishes work and rewards wealth.

The chart above is related to this article - How the Deficit Got This Big 

Despite what antigovernment conservatives say, non-defense discretionary spending on areas like foreign aid, education and food safety was not a driving factor in creating the deficits. In fact, such spending, accounting for only 15 percent of the budget, has been basically flat as a share of the economy for decades. Cutting it simply will not fill the deficit hole.

The first graph shows the difference between budget projections and budget reality. In 2001, President George W. Bush inherited a surplus, with projections by the Congressional Budget Office for ever-increasing surpluses, assuming continuation of the good economy and President Bill Clinton’s policies. But every year starting in 2002, the budget fell into deficit.