Gap between Wealthy and Middle Class Widens Again!

I didn’t say it, but we’d better all start thinking about it and worrying about it!”
by Charlie Leck

“Income inequality of the scale we have today is destroying our democracy.”
[Bob Crandall, retired CEO of American Airlines]

“The 1.2 million households whose incomes put them in the top 1 percent of the U.S. saw their earnings increase 5.5 percent last year… Earnings fell 1.7 percent for the 96 million households in the bottom 80 percent – those that made less than $101,583.”
[Peter Robison, Bloomberg News]

“In 2010, the top 1 percent of U.S. families captured as much as 93 percent of the nation’s income growth.”
[Emmanuel Saez, University of California economist from his study of IRS data]

I remembering lecturing my girls about home ownership; and telling them that buying a house would be the single-most important investment they would make. It’s no longer true. Since 2006 there has been a 5.8 trillion dollar loss in home values.

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More on America as a Commercial Republic

I suggest, for further reading on the subject, Joseph Stiglitz’s book, The Price of Inequality.

by Charlie Leck

I had lots of reaction to Saturday’s blog, America as a Commercial Republic, and I appreciate it. Just under twenty readers wrote personal emails to me and, I’d say, the reaction was about 50/50. The emails contained a number of good suggestions by which I might further enhance my understanding of economics and economic theory and thus better understand “the commercial republic” about which our founding fathers, Alexander Hamilton and James Madison, wrote.

Among those suggestions came several about Joseph Stiglitz’s book, The Price of Inequality (on sale at Amazon for under $20). Stiglitz’s original doctoral thesis dealt with the question of income inequality and imbalance and how much the market could handle before it stifled economic growth. His latest book is an expansion on the original dissertation. One of the points made in that book, and which I was trying to make in Saturday’s blog, is that excessive, concentrated wealth has a massive impact on the balance of political power.

Stiglitz, about whom I have written on this blog a number of times, is a professor of economics at Columbia University and winner of the Nobel Prize in economics. He is not alone among economists who warn of a developing plutocracy in America (a democracy controlled by the affluent for their own interests). Stiglitz warns of an America that becomes dangerously divided by economic class. The mixed economy could easily disappear and be replaced by a sharply divided economy with virtually no middle class (or certainly a middle class unrecognizable in relation to our current definition of it).

I lean toward the opinions of Stiglitz and I admire his thinking and candor. His earlier book (with Linda J. Bilmes), The Three Trillion Dollar War, about the true cost of our war in Iraq, was an important contribution to our understanding of why the economy soured (long before Obama took office).

American capitalism, in the minds of economists and political scientists, has always been a force for contributing to the quality of life for all our citizens. That is what Hamilton and Madison were getting at in their concept of “the commercial republic.” Now, however, there is a real danger that the strong middle of the American economy is sliding downward and leaving a huge gap between the nation’s wealthy and the rest of the people. In the past there have always been corrective procedures in place within the American political system. Those procedures were severely weakened, however, by the Supreme Court’s decision in Citizens United whereby the nation’s corporations and significantly wealthy were given a bigger slice of political power (which was, of course, the thesis of Saturday’s blog).

I am afraid that a Republican victory in November will only exacerbate this developing political and economic problem in America.

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Read My Lips: Raise My Taxes!

A report by the Congressional Research Service leaves little doubt. The income gap has grown enormously!
by Charlie Leck

Preamble!
Is it important that I state up front that I am not in the middle or lower income tax brackets. In a fair world, I should be paying more taxes. This statement is only a preamble to the subject of today’s blog about the dramatic growth of the separation between the wealthy and not-wealthy in this nation. I only think your understanding of my standing makes the following statement more credible.

A report has just been released by the (nonpartisan) Congressional Research Service that seems to explain the reasons for the growing divide in economic status in America. For a full explanation of the report I recommend this story in Monday’s edition of the Washington Post. If you really want to read the report itself, you can find it here.

What you’ll find is that Warren Buffet has been right-on in what he’s been telling us about the income tax rate for years; essentially that “the share of total after-tax income attributable to dividends and capital gains grew by 40 percent, faster than any other category.” Those in our society who receive such income pay a much smaller rate on it than the fellow who files his w2 forms on his earned income at the end of the year.

George W. Bush’s income tax cuts for the wealthy made an enormous difference in this country and are primarily responsible for this huge and widening gap. “…the Bush tax cuts of 2003 blew it wide open by slicing the top rate on dividends and long-term capital gains from 28 percent to 15 percent.” (Don't get me wrong, a Congress controlled by Democrats had to approve the Bush tax cuts!)

And, the impactful recession we’ve just gone through has made matters even worse by deadening the ability of middle class income to grow.

“Not only does this foster inequality, it also creates an incentive to seek investment income rather than the ordinary kind…”

The report argues convincingly that this income of the wealthy has already been taxed at the corporate level to the tune of approximately 35 percent. While a hike in the amount of taxes the wealthy pay on dividend and capital gains taxes seems appropriate, a lowering of the corporate tax rate might also make sense.

One has to decide whether this growing and enormous gap between the haves and the have-nots in this country is creating an unhealthy society. To me, there doesn’t seem to be much to argue about.

Our federal tax system must be reformed in a manner that will enable a strengthening of the middle class.

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The Occupy Movement Keeps On Ticking!

What’s going on with this Occupy Movement? Could it possibly catch on?
by Charlie Leck

Are you still trying to figure out the Occupy Movement? Me, too! I’ve listened to a number of interviews with protestors and I’ve read a number of accounts about the individuals who are involved. Anger and disappointment are the only two constants I can find among them.

Occupy is the central name – whether it is Occupy Wall Street or Occupy Seattle! However, as the NY Times pointed out in a story in Tuesday’s paper, “But not every group that has embraced the name marches in the same contentious lockstep!”

The protestors range from people who want marijuana legalized to people who oppose our involvement in foreign wars.

Yet, I keep sensing that economics is at the bottom, or base, of every occupation movement in every city. It is more and more difficult for people who consider themselves middle class to live like middle class people (I wrote succinctly about this phenomenon yesterday).

There does seem to be a common sentiment that the protest is against a system that is stacked against the middle class. The rich and the connected are getting along fine. As one moves down the economic ladder, life and one’s options get tough.

Talk to the conservative rich about these protests and you’ll generally get a smile. “Patience,” they counsel, “and then all will return to normal.”

What does that mean? Is it that the economy will finally improve and with it the situation of the middle class? Or does such advice to be patient simply mean the protestors will eventually tire out and give up and go home to more comfortable places to sleep?

Have any of you asked yourselves if there is a possible connection between these occupy protests in the United States and the Arab Spring? Oh, my! I’ve gone and said it! It is not a stupid question. It is worthy of thought and consideration.

So far the protests are too small to be compared to what happened in Egypt or to what is happening in Syria. But what if? What if? What if it were hundreds of thousands in New York City instead of a few thousand?

How would authorities here react? What could we do after we so criticized Arab governments for their tough crackdowns?

A chess piece will have been moved into a check position and authorities will have been challenged to respond. With only a few hundred protestors here in Minneapolis, it has been easy for government officials and police to handle the situation; but what if the numbers get up to seven or eight thousand?

What if fed-up folks from up there in Lake Wobegon decide to come down here to the cities to join ‘em in their demonstrations? What if Dorothy, at the Chatterbox Café, begins suggesting that “Maybe them folks down there in the Twin Cities has got somethin’ in what they’re a doin’ anyway!” What if the Norwegian bachelor farmers and the Whippets baseball team agree with Dorothy? You can be sure they’re talkin’ about all this over at Ralph’s Pretty Good Grocery! It’s not like Lutherans to protest, you know, but, then again, you never know!

I wonder, too, if all of this is the other side of the coin from the Tea Party Movement!

When will Congresswoman Bachman start calling the protestors communists or, at least, suggest they are communist controlled?

So much to watch over and wait to see where it goes!

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Where goeth the Middle Class?

The middle class seems down and out in America and there may be some explanations!
by Charlie Leck

According to AARP (America Association of Retired People) there has been only a three percent increase in full-time earnings for male workers in America over the last twenty years. Did you get that? Only a 3% increase in earnings over the last 20 years.

At the same time – that is, during that twenty year period – we’ve seen the following increase in costs:

A 73% increase in the average cost of one year of college!

A 182% increase in health insurance premiums!

A 292% increase in the median debt of middle-class families!

Is it possible? These statistics were put together by the National Alliance for Caregiving/AARP, Gallup, Harris Interactive, and the AARP Public Policy Institute.

Does this explain why folks, in dozens of American cites, are demonstrating against corruption on Wall Street, corporate power and the American banking system?

While banking and business corporations (including health care corporations) continue to grow their political and economic power, the people are losing theirs.

“Something is rotten in the state of Denmark!”

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Obama and the Bitter Folks in the Middle

What’s all the mud against the wall over Obama’s remarks?
I don’t get it!
by Charlie Leck

"It's not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren't like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations." [Barack Obama]

I don’t get it. What’s all the excitement about Obama’s remarks? They seem quite right-on to me. Look here, we’re talking about people who are going through some shaky times right now. That Dodd fellow on CNN says they’ve disappeared and fallen a rung lower on the socio-economic scale. I’d be bitter, too.

I am bitter. I’m trying to figure out what to cling to. In my case, guns or religion won’t work and I don’t mind people who aren’t like me and I don’t have anything against immigrants.

So I cling to a rage against the stupid idiots who got us into this jam. I begin with the crummy President of the United States, who happens to be the leading idiot among this vast group of jerks.

They came to us claiming to be genuine conservatives. They were frauds. They’ve grown government to the largest size in our history. They’ve cut taxes for the wealthy and forgotten about those bitter folks about whom Obama talked. They started a war that wasn’t necessary and it’s cost us 3 trillion dollars and the health of our economy.

Who wouldn’t be bitter if they were from the vast, former middle class of our nation?

I think Obama made a mistake by trying to retract the comments. “I could have expressed myself better,” he said. That was after earlier saying there was a…

“…political flare-up because I said something that everybody knows is true, which is that there are a whole bunch of folks in small towns in Pennsylvania, in towns right here in Indiana, in my hometown in Illinois, who are bitter…. They are angry. They feel like they have been left behind. They feel like nobody is paying attention to what they're going through… So I said, well you know, when you're bitter you turn to what you can count on. So people, they vote about guns, or they take comfort from their faith and their family and their community. And they get mad about illegal immigrants who are coming over to this country."

Well, I have a bunch of friends who would say, Obama was talking about me and he got it precisely correct. What was it that Howard Beale, the newscaster played by Peter Finch in Network said? He went to the window and shouted it to the world. “I’m bitter as hell and I’m not going to take it anymore!”

All right! So he didn’t use the word “bitter” at all. He actually said angry. Would Obama’s words have come off better if he had used “angry” instead of the reference to bitterness? Answer: Yes, a little bit better.

However, it appears the real criticism has to do with his description of these foundering folks clinging to things like guns, pickup trucks, religion or to an anger against immigrants and people unlike them (racially, maybe)?

The truth is, people have got to cling to something when they get so ripped off. I do! I cling to these daily blogs and I leak out some of my frustration on you.

Senator Obama, let me tell you this: You got it right if you were talking about me and you got it right if you were talking about a lot of my neighbors. We’ve no life vest and no other devises to keep us afloat. We’re thrashing around, looking for something to cling to. We know that the government isn’t going to help out.

George Bush isn’t worried about the sky-rocketing cost of health care. Look at the new insurance company policies revealed in the last couple of days about enormous co-pays on expensive prescription medicines. We just got the shaft again!

George Bush isn’t going to give any careful thought to a creative, sane and fair way to end this war.

George bush doesn’t care that our schools are in shambles.

George Bush doesn’t have to worry about the price of gas.

What’s wrong with the economy, George? “We built too many houses,” is precisely want he told a TV interviewer. He meant it. George Bush is incapable of figuring out this rotten economy and he won’t be able to fire it up again.

Unemployment is at its highest level in many, many years. George Bush has no ideas about what to do.

Oh yes, our national debt is at an astronomical level and solving that problem is going to be left to our children and grandchildren.

You bet your ass that I’m looking for something to cling to. You bet I’m bitter. I’m damned angry and I’m damned bitter.

You got it right on the button, Senator Obama, and we the people know it!

Remember these words that Howard Beale also said in that movie, Network:

"Television is not the truth! Television is a goddamned amusement park!"

The War Was Always There

The Four Great Issues in the United States
by Charlie Leck

As Hemingway wrote over 70 years ago: "In the fall the War was always there, but we did not go to it anymore!"* So it is when I list the crucial, vital issues facing America and Americans in the next election. The horrible war is there, but I'm not going to it here. Beside the war, here are the great problem issues that politicians must face and solve in America?

1. Poverty and the disappearance of the middle class in our nation threatens economic stability
   
2. A new isolationist and anti-immigration movement threatens our leadership position in the world
   
3. Health care equality is not an option but a constitutional right
   
4. Curbing the hatred of the Christian right is vital in order to preserve an open and free America
   

We are still a year away from making the decision about who we'll vote for in the next national election, but let me say, without drama but with certainty, that this may be the most important election in which any of us has ever cast a vote. I have listed above the four great issues that I will use as a litmus test for the candidates. Where they stand on these matters will dictate how I vote.

Curbing the hatred of the Christian right

You can be certain that I will not vote for any candidate who is sympathetic to the right wing of the Christian faith. These are dangerous people. They are motivated by hate, rather than the love recommended by their Christ, and they teach that hatred to young children. The viciousness of the propaganda I receive from them makes me shudder in fear and nearly weep in sorrow that they so poorly understand the sacred man to whom they claim to commit their lives. We must find a constitutional way to curb the hatred promulgated by this group within our society. They not only do great harm within our nation, but they also depict us unfavorably around the world. The Christian right has no sympathy for those of us who are humanist or universalist Christians. Exclusivism is dangerous in any format. It is frightening in matters of faith. Those of you who share this concern about the pressure that the "right" puts on candidates and elected officials ought to know about PEOPLE FOR THE AMERICAN WAY (founded by Norman Lear, Barbara Jordan and other outstanding Americans). This organization is a watchdog that tracks the political activity of the Christian Right and reports it.

Health Care Equality
America ranks very low among developed countries when it comes to the distribution of health care. I'll leave for further debate the quality of that health care. My concern here is that a huge percentage of Americans do not have high quality health care available to them because of its expense. Now, it's fine if a fellow American cannot afford a BMW and must settle for a Ford Taurus. That is capitalistic democracy at work. High quality health care, by rights of our democracy and according to the written guarantees of our republic, should be affordably available to every citizen of United States. To me, this is an absolute! There are no exceptions! In a two year period, a neighbor of ours, who headed a health care delivery company, earned nearly 200 million dollars in stock option bonuses. It is only one of many such examples in America. What's the point? You figure it out!

Ending the new isolationist movement and the anti-immigration movement
Opposing the immigration of certain elements (certain people) is nothing new in America. There is a history of it. Italians have faced it and so have Germans, Irish and Asians. Awful and terrible things were said about these peoples in an attempt to keep them out of the country. Today the hatred is turned against those from the Middle East and especially toward Muslims. People I normally admire for reasonableness and rationality seem to lose both on this issue. Again, we must realize that our nation was built on the openness of its borders. This is not written on the Statue of Liberty: "Come if you are white, Anglo Saxon and protestant!"

"Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me.
I lift my lamp beside the golden door."

Don't dismiss it! This is part of our rich history. It is what made us the greatest nation in the world. If we abandon this spirit, we become just another among the common nations of the world. We will have no right to leadership. We will lose the great respect and honor that has been bestowed upon us. Most frighteningly, we will abandon the challenge of our founding fathers. The religious right intends to frighten people to death on this issue. They are hate-mongering and even telling giant fibs. They speak without substance!

Restoring a balance of wealth
There are probably more diplomatic ways to say it, which won't so offend the radicals on the far right, but the wealth of the nation has become too unbalanced. That is the same as saying that the middle class has lost its position of eminence and power. It is an elementary principle of sociology that a culture needs a strong, diverse and respected middle class. If politicians know what is good for us, they will legislate the middle class back into a position of such respect and strength.

If you are looking for a list of issues on which to judge the campaigning politicians in the next year, I recommend this one to you. Print it out! Post it on the refrigerator. See how the campaigners stack up on these issues.

*In Another Country (1928)
"In the fall the war was always there, but we did not go to it any more. It was cold in the fall in Milan and the dark came very early."