Categorized | Opinion

The American Dream works best for the super-rich

“It’s called the American Dream because you have to be asleep to believe it.”
George Carlin

The “rags to riches” mythology of Horatio Alger was always better suited for fiction than reality, but such “rugged individualism” of lore has now become increasingly dubious and seemingly preposterous in the face of a fading American Dream.

For the past few decades, the policies coming from Washington, combined with the high stakes gambling of Wall Street, have contributed largely to a country that has become beholden to the interests of the mega-rich and megalithic corporations at the expense of the American community at large.

Those familiar with the Occupy Wall Street movement have probably heard the protesters refer to themselves as the “99 percent.” The “99 percent” refers to the top 1 percent of the super-rich elite in this country as opposed to everyone else.

It also refers to the huge, widening gulf of disparity growing between the rich and poor in this country while the middle class shrinks.

This is the fourth and penultimate installment of my series on the Occupy Wall Street movement. In the previous installments I have explored the shady criminal practices of Wall Street and how Washington enables such behavior through deregulation.

In this installment, I would like explore where these policies have left the average American.

Income inequality 

The top 1 percent owns 42 percent of the nation’s overall wealth (when counting income as well as assets) according to a study done for New York University by economist Edward N. Wolff.

And according to a study by the Center on Budget and Policy Priorities, when it comes to pure income, the top 1 percent owns about 17 percent the nation’s income, the highest level since 1979, “while the share going to the middle one-fifth of Americans shrank to its lowest level during this period (14.1 percent).”

Forbes magazine reported that the net worth of the top 400 richest families in America alone is $1.37 trillion, which is more than the bottom 60 percent in this country combined.

Income inequality is at all-time high in the United States, as a study by Berkeley Professor Emmanuel Saez found income inequality to be at its highest rate since 1913 (when the income tax was instituted).

Furthermore, Saez states in his study, “The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007.”

A report released last week by the Congressional Budget Office found that, since 1979, the top 1 percent saw income grow by 275 percent, whereas the average middle class income grew by less than 40 percent, and the bottom 20 percent of the population’s income grew by only 18 percent.

The report concluded: “As a result of that uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979.”

The Organization for Economic Cooperation and Development found that the United States has the fourth overall worst income inequality of developed countries in the world. Only Turkey, Mexico and Chile have worse income inequality. 

Wage stagnation

But as the rich keep getting richer, the middle class is shrinking and the poor are getting poorer.

According to the Economic Policy Institute, in 1965, the average CEO earned 24 times what the average worker made, and by 2006, the average CEO earned 262 times the pay of the average worker.

Also, the Bureau of Labor Statistics found that union membership has fallen to just 12 percent of workers, which is one of the lowest rates of all developed countries according to the World Economic Forum. In 1983, union membership in America was 20 percent. In 1954 it was almost 30 percent.

By studying data from the Bureau of Labor Statistics, Les Leopold, the author of the book “The Looting of America,” found that wages for the average worker in the United States have stagnated and, at times, even fallen over the past several decades while, at the same time, productivity has risen.

Leopold concluded: “By 2007, real wages (in today’s dollars) had slid from their peak of $746 per week in 1973 to $612 per week — an 18 percent drop. Had wages increased along with productivity, the current average real wage for nonsupervisory workers would be $1,171 per week-$60,892 per year instead of today’s average of $31,824.”

So, for the past several decades, the lower and middle class have been getting paid about the same, and at time even less, for more work, while the upper-management’s compensation has skyrocketed.

The U.S. Census Bureau reports that the median household income in America is $50,221.

But almost half of the members in Congress count themselves as among the rich in this country. According to the Center for Responsive Politics, the median income for a member of Congress is $911,510, and 261 members are millionaires. Is it any wonder why many of the the policies coming from Washington the past few decades have favored the rich?

Poverty and homelessness

Meanwhile, more Americans are now on food stamps than any other time in our nation’s history, some 43 million people or more than 14 percent of the population.

And according to the Census Bureau, a record number of Americans are now living in poverty: 46.2 million people, over 15 percent of the population, which is the highest number the bureau has found since it began studying poverty rates 52 years ago.

A new study conducted by the Foundation for Child Development also found that child poverty has reached its highest level in 20 years, with nearly 22 percent of children now living in poverty in the United States.

The report found that 15.6 million children are estimated to be living in poverty, and that as many as 500,000 children are homeless.

The most recent Annual Homeless Assessment Report to Congress found that, across the country, approximately 650,000 people are homeless, and approximately 1 million people live in homeless shelters.

Tax aversion

Well, the rich may be getting richer, but at least they pay their fair share in taxes, right? Not hardly.

The top tax bracket in this country (those making over $379,150) is supposed to be 35 percent. Even though this tax rate is one of the lowest in the history of our country, the super-rich don’t actually pay anywhere near that.

Billionaire Warren Buffett wrote a now-famous piece for the New York Times this summer showing that he actually only paid 17.4 percent in taxes in 2010, far below the 36 percent his far less wealthy employees paid.

And Buffett’s experience is about average. According to the IRS, the top 1 percent now has an average tax rate of about 17 percent. In 1995, the average tax rate for the mega-rich was about 30 percent. 

Why do the rich pay so little? That’s because most of their income (over 80 percent according to the IRS) comes from long-term capital gains, dividends and carried interest, all of which are taxed at a maximum rate of 15 percent.

So, while the rich may pay the majority of the taxes in this country, they are not paying their fair share. Much of the same can be said for corporations.

The corporate tax rate for the largest corporations in the United States is 35 percent. It’s one of the highest corporate tax rates in the world — or it would be, if American corporations actually paid their taxes.

With the clever use of subsidies, tax benefits, foreign subsidiaries and overseas tax havens the effective corporate tax rate in 2008 was just 5.3 percent according to a report by Forbes Magazine.

In 2009, General Electric raked in over $10 billion in profits but paid exactly zero in taxes. Bank of America not only paid zero in taxes but actually received a tax benefit of $1 billion.

And these corporations are not alone. Boeing, Citigroup, Exxon-Mobil, and Wells Fargo also paid no federal income taxes, to name just a few companies.

A study by the Government Accountability Office found that two out of every three American corporations paid no federal income taxes from 1998 to 2005.

So, not only are corporations not paying their fair share, but some are simply paying no share at all.

Something is seriously wrong here, folks. Every statistic shows that over the past several decades, the gap between the rich and poor is widening, the middle class is shrinking and the American Dream is fading.

The great Hunter S. Thompson often used to write about what he referred to as “The Grim Slide” — the concept that the American ideals we once held so high were slipping away, becoming awash in a country bought and sold to the highest bidder. But what Thompson feared so many years ago has only exacerbated.

However, I still think there’s light at the end of the tunnel, and next week, in my final installment of this series, I will explore what, if anything, can be done to reverse the slide.

W. Paul Smith
Opinions Editor

Occupy Wall Street Series:  Part 1   Part 2   Part 3   Part 4   Part 5


Cartoon courtesy of Andy Marlette/amarlette@pnj.com


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