The Big Fix to Income Inequality

Income inequality is the defining and dividing issue of our time, as President Obama has reminded us in a series of speeches over the past few months. The huge gap between the richest 1 percent and the rest of us has been the subject of much debate and even “occupy” demonstrations targeting Wall Street greed and government inaction. But little is done, even though we have a prescription to reverse inequality and restore the middle class to our economy.

ImageThe remedy is presented by former Clinton Secretary of Labor and economics guru Robert Reich, who recently took us on a Mini Cooper spin through income inequality and what it means to our society. Reich is the impassioned lecturer-in-chief in “Inequality for All,” a smart and insightful documentary detailing the historic nature of the inequality problem, and how it has come to a head.

“Inequality for All” won a special award for documentary films at last year’s Sundance Film Festival but was ignored by the Academy of Motion Pictures.  The Oscar-nominated documentaries were more dramatic and visual than “Inequality for All,” I grant you, but perhaps none of them as important. Without a major commercial ad campaign, Reich nonetheless is able to push it relentlessly through his social media network – and I’m happily caught up in that loop.

The film is available via Netflix, Amazon and on-demand services. You will have to put up with the recurring lecture format to get to Reich’s keen insights and observations at the heart of the film, but you will be rewarded for your attention with a better understanding of a very serious problem in our nation. Fortunately, Reich uses humor and clever graphics to help tell the story:

The image of the suspension bridge frames the largest income gaps — between 1929, ahead of the Great Depression, and then again in 2007, just before the housing bubble burst and our extended Great Recession. We have reached a period not unlike that of FDR’s New Deal in the 1930s, when we should be changing the rules of the game so that the destructive nature of income inequality doesn’t eat our middle class and collapse the social order.

But the political system is responding slowly, choked by influence peddlers with a vested interest in the status quo. The robber barons of today have a lot more resources at their disposal for influencing both public opinion and political alliances. The Supreme Court ruling in the Citizens United case, allowing unlimited spending on political campaigns, has further stalled political action.

In fact, since the beginning of the recovery from the 2007-09 recession, the top 1 percent has resumed its accelerated income gains while the bottom 99 percent has returned to stagnation and loss, according to the Economic Policy Institute, which has been tracking the trends in unshared prosperity since the 1970s. A state-by-state EPI study released Feb. 19, found that in 33 states the top 1 percent captured between half and all income growth from 2009-2011. This is continuing an alarming trend:

“The lopsided growth in U.S. incomes observed between 1979 and 2007 resulted in a rise in every state in the top 1 percent’s share of income,” EPI reported. “This rise in income inequality represents a sharp reversal of the patterns of income growth that prevailed in the half century following the beginning of the Great Depression; the share of income held by the top 1 percent declined in every state but one between 1928 and 1979.”

You can find out how your state ranks in income disparity with the EPI’s interactive feature linked to its report here: http://www.epi.org/publication/unequal-states/

Still, nearly seven in 10 Americans say the government should act to make sure the rich pay their fair share and more Americans share in economic prosperity, according to a CNN survey a few weeks back. And that view has held remarkably steady: in 1983, 68 percent of Americans favored government action to narrow the divide. Today, that number is 66 percent.

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So, what’s to be done? Part of the solution is to get the big money out of politics. Other laws and reforms are necessary. Here’s Reich’s prescription, which you can find at www.inequalityforall.com:

  • Raise the minimum wage. Many states have raised the minimum on their own, but it’s long past time for the United States to raise the federal minimum wage. We must ensure that fulltime jobs have wages and benefits that allow people to afford the basics.
  • Strengthen workers’ voices. Unless employees enjoy the fundamental right to form and join unions to bargain collectively with their employer, they will continue to be undervalued and disrespected in the workplace.
  • Invest in education, ensuring that everyone has an opportunity to a quality education, from early childhood to college.
  • Reform Wall Street. We must ensure the financial sector is working honestly and accountably to prevent it from taking over our economy.
  • Fix the tax system so that everyone is contributing a fair share. We must reverse the Ronald Reagan tax shift that benefited rich individuals and corporations and dumped on the rest of us.
  • Get big money out of politics. New laws are needed to overturn Citizens United so that corporations can’t spend unlimited amounts of money on campaigns and in return affect public policy and spending priorities.

As Reich notes in his documentary, solving the income inequality problem will require citizen action, making our voices heard over the thunder of the big-money influence peddlers. I like to think we can go back to basics, a la Dr. Seuss and the beloved Lorax:

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We Need Robin Hood

A new report underlines the basic problem with the post-Great Recession American economy: the rich are getting richer while everyone else is falling further behind.

The study by the Pew Research Center finds that the average net worth of the top 7 percent of the U.S. population increased 28 percent in the first two years of the recovery.  The wealth of the other 93 percent declined.

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From 2009 to 2011, the average net worth of the richest 8 million households jumped from an estimated $2.7 million to $3.2 million, according to The Washington Post report on the Pew study. For the 111 million households that make up the bottom 93 percent, average net worth fell 4 percent, from $140,000 to an estimated $134,000.

Sadly, this is not a recent phenomenon. The divide between the rich and the poor has been yawning progressively – or should we say, regressively – since the early 1970s.  A study last September by the Economic Policy Institute (EPI) in Washington noted that the median annual earnings of a full-time, male worker in the United States in 2011, at $48,202, were smaller than in 1973.

Between 1983 and 2010, 74 percent of the gains in wealth in the United States went to the richest 5 percent, while the bottom 60 percent suffered a decline, the EPI calculated. Any way you figure it, the middle class is getting screwed.

Robert Reich, the former Labor Secretary under Bill Clinton, offers a concise six-point plan to reverse the slide of the middle class and to build shared prosperity for the entire nation. It is not a soft scrub, by any means:

  • Award tax cuts to companies that link the pay of their hourly workers to profits and productivity, and that keep the total pay of their top 5 executives within 20 times the pay of their median worker. And impose higher taxes on companies that don’t.
  • Raise the minimum wage to half the average wage.
  • Increase public investment in education, including early-childhood — especially in the poor and middle-class communities that now lack decent schools.
  • Eliminate college loans and allow all students to repay the cost of their higher education with a 10 percent surcharge on the first 10 years of income from full-time employment.
  • Expand the Earned Income Tax Credit.
  • Add tax brackets at the top of the income tax scale, increasing the top marginal tax rate to what it was before 1981 – at least 70 percent.

The first and last of these proposals are key. We must use the progressive income tax system to level the playing field, to give the 93 percent a chance to get back in the game. The rich must pay more. But the rich have means, so we must beware. We must recognize the vicious nature of the reactionary campaign by corporate forces already underway. Consider this fractured fairy tale:

It should be simple math: the 99 percent should prevail against the 1 percent in a democracy, right? But our democracy is skewed by big money; corporations have bought politicians for years, with few fingerprints. Not just the inside-game glad-handing and lobbying, but also with well-funded public relations campaigns, trying to shape the message to hide the greedy corporate agenda.

The Koch brothers, authors of much of the disinformation during the last election cycles, reportedly now may buy the Tribune Company to help push their right-wing agenda – adding to the noise of Rupert Murdoch’s Faux News and Wall Street Journal editorial page.

While we fight this uphill battle against the anti-democratic forces that grease the palms of too many political leaders in the United States today, we can be cheered by an ongoing global campaign to rectify the inequality through a “Robin Hood Tax,” a levy on transactions of stocks, bonds and derivatives first proposed by the National Nurses Union and their international allies.

ImageWith 1,000 demonstrators calling for reform in the streets outside the International Monetary Fund meeting in Washington last weekend, finance ministers from the EU were reporting on their negotiations to impose a financial transaction tax. The proposal: a tiny 0.1 percent tax on stock and bond trades and 0.01 percent tax on derivatives trades. The return would be  an estimated $750 million to $1 billion over 10 years to plow back into their economies and create jobs through public works and other stimulus programs.

A Robin Hood Tax on transactions would be a small price to pay by the global financial giants that created the Great Recession in the first place with their risky speculation schemes. But it’s just a beginning.

Perhaps we cannot resurrect Robin and his merry men to shake up the power brokers in Washington, where money rules most ignominiously. But we can recreate the spirit of appropriating from the greedy, of which there are many nowadays. Let’s insist on policies and reforms that close the great divide between the rich and the rest of us.