Odd, Very Odd
Twenty men who work as directors of twenty private equity firms in 2007 earned on average more than $650 million each. Their combined income was over $13 billion. Twenty ordinary workers and payday is $13 billion. They are taxed at 15% rate, a rate lower than everyone else, because of some crazy tax justification, and Congress won’t change the law. The median income in the U.S., with a workforce of over 140 million workers is above $32,000. So these 20 earn in excess of 20,000 times the middle-earning worker, or half the workforce, but pay a lower tax rate. If I live in a city of 400,000, those 20 people earn as much as the entire city combined. (This is reported in In These Times magazine, page 34, November, 2007, Pirates of Private Equity, by Adam Doster, citing a report by Institute for Policy Studies and United for a Fair Economy.)
Sixty percent of the workforce earn 20.3% of the national income, while 1% earned 18.4% (see The State of Working America, 2006/2007 by Michel, Bernstein and Allegreto, Economic Policy Institute, page 79) And 80% of the workforce earned 40% of the national income. One person in a hundred earns what 60 combined earn. Eight tenths of the workers earn four tenths of the income.
Furthermore, half of the U.S. households own 2.5% of the national net worth, or property. That implies a 40 to 1 ratio between two equal halves of Americans. The top one percent own 33.4% of everything, the next nine percent own 36%, the next 40% own 28% and the bottom 50 percent own 2.5% of the American pie whose total amount is over $50 trillion dollars. But in terms of debt and ownership of cars, the rates between the two halves are the same.
In Mexico the average wage is about 12% of the average wage in the U.S., and on the border in the maquiladora factories the wage is 6%, and in undemocratic China the wage is 3%, and extended into dollar amounts it comes to $16 a day in central Mexico, $8 a day in the maquiladoras, and $5 a day in China assuming a ten hour work day. Our cars, our stereos, our flat screen TVs, our plastic razors, and so forth, come from all these hardworking people who couldn’t survive in the U.S.A. earning the little they earn.
In Mexico half the families report that at least one person earns $7 a day or less. In Mexico the government reports that about 26% of all deaths are related to malnutrition, and other sources report that the actual rate is double the official rate.
You might go to the Web page “lcurve.org” to see how income is distributed in the U.S.A. Also you might go to inequality.org and toomuch.org and discover other Odd, Very Odd details about our economic life.
Complaining is one thing. What to do? and Who is going to do it? is quite another thing.
Voting and monitoring your representative and joining in awareness groups is the best action. I’m hoping that Congress will have to pass the gauntlet of groups that insist on fundamental changes. They will receive ratings from these groups, and voters will be educated on needed reforms. These reforms will affect the broad community, and by ties between communities local changes will become possible.
Here is a sample of issues that have to be considered:
1. Unionization rules allowing formation of unions, appointments to the NLRB, enforcement of labor rights are needed. Because shared prosperity is basic to economic health this will be necessary.
2. Taxation and tax policy. Redistribution is a viable form of economic reform, and progressive income taxes can play a large role. Not only raising top marginal income tax rates, but lifting the cap on Social Security taxes, or creating another rate for incomes over $100,000. A wealth tax has been discussed by Gar Alperovitz writing in the magazine Dollars and Sense, and is policy in five European nations. And the Earned Income Tax Credit, and Individual Development Accounts are tried methods of lifting low income/low wealth families from poverty.
3. Trade policy obviously should include workers’ rights and environmental oversight. It should also include a minimum wage standards for exporting industries that send products into American markets. Trade with politically repressive nations should be curtailed, and that means non-democratic China.
4. Federal Reserve policy should be expansive to increase employment while gambling that inflation will not be induced through higher labor rates. Naturally this is a technical assessment and assumes oversight by progressive scholars who understand the intricacies of monetary policy.
5. Federal Jobs Program that aims at full employment. Probably the most significant measure to ensure a healthy society is a policy of government acting as employer of last resort. Demand-led economic growth will have to become the normal model on a national level. This requires a very great change in social awareness of economic growth. Roosevelt did not finish his revolution, but we can still move forward.
6. Minimum Wage policy must be high enough to support a family of three, or a set percentage of the prevailing national wage.
7. Immigration must be addressed. We changed from 300,000 a year to over 600,000 legal immigrants a year in the era of Lyndon Johnson. Also illegal immigration increased to about 300,000 a year. We are approximately 5% of the world’s population, and no limits to immigration would result in massive inflows into the country.
Very odd? All this sounds very odd. It implies a public that is aware of many economic factors, including the household median income, the income tax rates, the role of corporations and the active community participation in their governance, the distribution of wealth and the controls on the power that implies. Mostly it will involve removing the influence of wealth from democracy and information dissemination. Other non-profit information avenues will have to come to the fore, and a candidate that does not conform to public financing of his campaign will be ostracized politically.
It implies a sense of common well being. I don’t think that humanity need change fundamentally, but the normative standard will include those values that will make true equality of opportunity a reality for all children. “A chicken in every pot,” or a college savings account in every child’s portfolio. Equality will be more meaningful than the chance to pay off a debt on a large powerful vehicle which eventually you will own. At eight dollar per gallon gasoline, even that opportunity may vanish. Odder things have happened. “We can do it” will be a standard assumption.
March 3, 2008