(The following is a reposting of an entry from August of 2010 with minor updates.)
This posting was inspired by an article at Rational Revolution. It takes another look at the disproportionate shift in income to the mega and ultra rich, the disproportionate tax breaks for the mega and ultra rich, and the creation of national and personal debt not seen since the Great Depression.
The similarities of the Great Depression of the last century to this century’s Great Recession on certain key measurements are critical to our future. Come the midterm elections and beyond, we can continue the destruction of the American middle class or continue the hard changes that have only just begun to rebuild the middle class.
Remember the trickle down theory of supply side economics that was supposed to result from tax breaks for the rich? Well, here’s a recent example of how trickle down works decades after it was started and has since been amplified: LeBron is promised $125,000,000.00 while 30 of the teams’ support employees are fired.
No matter how much LeBron makes or how little he pays in income taxes, those 30 former employees are screwed. This is exactly what has happened to many more Americans since the right-wing authoritarians (RWA) have been running our economy and giving disproportionate and extreme advantages to the really rich. There are now more mega and ultra rich people in this nation, but there are many, many more middle class households that have gone into debt with easy credit, lost their jobs, lost their homes, and declared bankruptcy. Middle class America is being replaced by a plutocracy. I’d call this a legalized Ponzi Scheme, which is trickle-up economics.
Didn’t the course change started in November 2008 mean stop and fix what’s wrong!
“The Voodoo That You Do”
Let’s review the situation created by the RWAs. Instead of continuing to grow the income of everyone, as was done after WWII, we are now only helping the rich become the mega and ultra rich. While most of us, the Bottom 90 Percent, have seen our income gains drop more than 50 percent, the Top 1 Percent have seen their income gains grow by more than 50 percent. Notice in the chart below how today’s share of income growth for the mega rich is just as high as it was before the Great Depression.
(Note the slight recovery in income gains for the middle class
during the Clinton years.)
In terms of income growth by income group for before and after the RWAs took over, this shift is even more dramatic for the mega rich vs everyone else. Prior to Voodoo Economics, 1947 to 1979, income growth was fairly even – then the legalized trickle-up Ponzi Scheme started.
The Trickle Up TruthAs shown in an earlier posting and to highlight the current effect of trickle-up, the average income of the top 1 percent in 2005, as reported to the the IRS, was $1,200,000.00 and the average for the bottom 99 percent was $45,000.00.
Let’s take a closer look at some of those in that top 1 percent. The chart below compares the income growth of corporate executives. These mega rich are rich, not because they produce something, but because they are mostly accountable to fund managers who, as share holders, vote for excessive salaries to get the ‘best’ CEOs money can buy who will then protect the fund’s value. Notice the only metric doing worse than the average worker is the minimum wage.
Then there are the ultra rich hedge fund managers, who, unlike the middle class, have mostly investment income which is taxed at rates far less than the marginal income tax rate for earned income. Can you imagine making billions of dollars and only paying 15 percent to the government? And they still want more tax breaks? To be clear, the top salary for 2007 was $3,700,000,000.00. That’s 177 times more income than Lebron James 6 year contract. That must correlate to thousands of more unemployed middle class Americans?
Now add to these lopsided gains in income growth the increased tax breaks for major corporations and you see another reason for this shift in wealth to the rich. Their METRs have dropped by more than 30 percent while their contribution to our federal revenue has been cut in half:
This chart only applies to corporations
who have stayed in America for tax purposes.
(And now thanks to our “activist” Supreme Court,
more corporate profits can go to PACs for controlling our government.)
Then, as shown below, there are the increased tax breaks on earned income. They have also been disproportionately reduced for the wealthy who are still mostly ‘earning’ their income. (Without this reduction it’s harder for the wealthy to become mega rich and move to unearned income.) The second chart below shows the marginal tax for any earned income and the growth in income for the ultra rich, the top 0.1 percent.
60 Years of Republican Tax Breaks for the WealthyThe above earned income tax rates for the wealthy do not account for the even greater advantages that the mega and ultra rich have with even lower capital gains taxes for unearned income. For the top 400 taxpayers, less than 10 percent of their income is “earned” and subject to the marginal tax rates. Most of their income is taxed at the lower capital gains tax rate.
As the charts above show, the mega and ultra rich are getting disproportionately richer – their income growth is far outpacing that of the middle class – and their tax breaks are much more favorable! Most of us were fooled into believing there was trickle down – that’s what the RWA have told us. In reality, we have trickle-up and there is only the perception of income growth for the middle class from households with two incomes and going into debt up to our collective eyeballs. There is no trickle down when income growth and tax breaks have become so lopsided. Millions have lost their jobs as a few hundred have made billions without producing anything. These mega and ultra rich are sitting at the top of our legalized Ponzi Scheme and the middle class is disappearing.
Unlike the situation in WWII where everyone helped pay the nation’s bills, the RWA have reduced taxes, especially for the rich, and borrowed from other nations to pay for our wars and other expenses. The result of decades of tax breaks for the rich, the rich keeping too much of their excessive income, and enormous expenses for our military on top of our other federal expenditures, our national deficit has grown over 55 percent under the rule of RWAs and their Great Recession.
Not only has the nation’s debt escalated for decades, so has our personal debt. Citizens have borrowed like never before and we feel richer and believe that it’s trickling down from the rich that were given all those tax breaks. In addition, the government encouraged borrowing, corporations took advantage of lower rates, and the mega rich investors created innovative methods to maximize their unearned, under-taxed, income by encouraging the middle class to go into debt.
HOUSEHOLD DEBT AS A PERCENTAGE OF GDPHousehold debt:
Credit card debt, car loans, personal loans and home mortgages
How unfair is all this? Under the rule of the RWAs, most citizen’s personal debt has more than doubled and is near the levels that preceded the Great Depression, while at the same time income for the mega rich is as high as it was prior to the Great Depression.
I say again. This has to stop!!!
But if you don’t agree and if you want more disproportionate tax breaks for the mega and ultra rich, and for the corporations that make unlimited political contributions. If you want more national and personal debt, and if you want others to pay our debt so we can continue shopping, vote for The Devil’s Budget in November.
Remember, RWA are also known as “Conservatives without Conscience” and they are mostly common to the Republican and Libertarian party. A few also exist in the Democratic party.
Vote Republican??? – Vote Gozzle-up.