The 1 Percent gets 1 Percentier

February 5, 2015

Inequality in the U.S. is glaring--but no one in Washington will do anything about it.

YOU KNOW that inequality must have reached epic levels when even Republicans start pretending they think it's a problem.

Not that they want to do anything to close the massive canyon between rich and poor. But the fact that Republicans like House Speaker John Boehner and new Senate Majority Leader Mitch McConnell could go on 60 Minutes recently and bemoan the fact that the 1 Percent has sucked up a disproportionate share of the economic recovery suggests that even the GOP realizes it's not popular these days to sound like you're for the rich getting even richer.

Boehner and McConnell aren't alone. As the field of candidates for the 2016 Republican presidential nomination begins to take shape, several Republicans have discovered that they're very worried that: the American Dream is "out of reach" and the playing field is "no longer level" (Jeb Bush); "far too many people are stuck on the lower rungs" of the economic ladder (Paul Ryan); the "United States is beset by a crisis in inequality" (Mike Lee); and "the rich have gotten richer, income inequality has gotten worse, and there are more people in poverty than ever before" (Mitt Romney).

A homeless man rests outside a Prada store
A homeless man rests outside a Prada store (Fran Simó)

Note the irony of Mitt Romney suddenly discovering "inequality." This is the man whose presidential campaign was all but sunk after he was caught on videotape at a private fundraiser explaining that 47 percent of people would vote for Obama automatically--people who "are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it."

In reality, of course, the Republicans are fully committed to making sure the rich get richer and the rest of us pay the price. Rhetoric aside, the first party of big business has stood in the way of even modest proposals to raise the federal minimum wage, increase taxes on the rich, and even extend unemployment benefits for the long-term unemployed.

Meanwhile, Barack Obama's new budget proposal is being celebrated by liberals as a bold effort to challenge inequality. But the administration came up with its budget blueprint knowing that measures like a modest tax increase on the wealthiest and a "second-earner" tax credit to help families with two working parents cover child care costs would inevitably be shot down by Republicans--if not compromised away into nothingness.

For their part, Republicans are likely to push for cuts in entitlement programs like Social Security and Medicare, forcing more older Americans down the economic ladder--and Democrats will almost certainly give in on some of these proposals, in the name of "bipartisanship" and "fiscal responsibility."

At heart, both the Democrats and Republicans remain fundamentally committed to ensuring profits remain fat for those at the top--while ordinary people pay barely scrape by.

INEQUALITY IN America has already reached proportions that can only be compared with the notorious "Roaring Twenties" of a century ago.

As the New York Times reported, in the late 1960s, more than half of American families fell into what the paper calls the "middle class"--defined as an income of between $35,000 and $100,000 a year for a family of four, adjusted for inflation.

Leaving aside whether $35,000 is really anywhere near enough income for a family of four, let alone to place it in the category of "middle class," the Times pointed out that those in this middle bracket of income earners is now just 43 percent of households--and the bulk of those who moved out of this range in the past several decades fell out--they didn't move up.

Median household income has fallen 9 percent since 2000, according to the federal statistics cited by the Times. Married couples with children have been particularly hard hit. They made up more than 60 percent of middle-income earners in 1960. Today, they account for 44 percent. Overall, households headed by people aged 30 to 44 are more likely to be lower income and less likely to be middle income, in contrast to 2000. Fewer blue-collar and high school-educated workers are in the middle-income bracket today than in 2000.

Households headed by people 65 and older are more likely to be in the middle-income bracket today than in 2000. But as the Times pointed out, that's in part because "older Americans are increasingly working past traditional retirement age. More than 8 million, or 19 percent, were in the labor force in 2013, nearly twice as many as in 2000."

Those struggling include people like Lisa Land, who used to work at a textile company in North Carolina. According to the Times, Land was laid off in 2008 and forced to move into her parents' home to care for her ailing father. Today, they live on her father's $1,300 a month check from Social Security. Land's adult daughter also pitches in with money for groceries.

According to Land, it used to be that "[w]e wouldn't have a lot of money, but we had everything that we needed. Now, there's really no extra for anything. No vacation. No dining out. No stuff like that."

John D'Amanda, another worker profiled by the Times, used to make $30,000 a year running a window-washing business. But when the economy tanked, he lost clients. In 2009, D'Amanda was forced to get a job at McDonald's, where he makes just $9.25 an hour, barely above minimum wage. He could no longer afford his own apartment and car. Today, he pays $350 a month to share a small apartment with a roommate. "I'm barely able to afford that," he told the Times.

INEQUALITY IN America is rapidly intensifying, according to another new report, this one from the Economic Policy Institute (EPI).

According to the EPI's Increasingly Unequal States of America study, not only is growing inequality a long-term trend in the U.S., but recent income data show that the superrich have essentially sucked up any and all gains from the economic recovery, which began shortly after Obama took office, according to official measures.

"From 2009 to 2012, top 1 percent incomes grew faster than the incomes of the bottom 99 percent in every state except West Virginia," the EPI reports. "In 39 states, the majority of income gains after the Great Recession accrued to top 1 percent. And in 17 of these states, the top 1 percent captured 100 percent of income growth."

"Between 1979 and 2007, the top 1 percent took home well over half (53.9 percent) of the total increase in U.S. income. Over this period, the average income of the bottom 99 percent of U.S. taxpayers grew by 18.9 percent. Simultaneously, the average income of the top 1 percent grew over 10 times as much--by 200.5 percent."

In New York and Connecticut, the 1 Percent now earns average incomes more than 48 times that of the bottom 99 Percent. But even in states where inequality is less pronounced, the EPI says it is rampant: "Even in the 10 states with the smallest gaps between the top 1 percent and bottom 99 percent in 2012, the top 1 percent earned between 14 and 19 times the income of the bottom 99 percent."

Meanwhile, according to another recent report--the Corporation for Enterprise Development's "Assets and Opportunity Scorecard"--one-quarter of U.S. jobs are considered "low wage," an increase of more than 4 percent in a single year.

More than 55 percent of U.S. consumers have subprime or near-prime credit scores--and some 20 percent of U.S. households are forced to routinely depend on "fringe financial services" such as payday lenders. The report also found that fewer than two-thirds of Americans own homes, a 20-year low. Fewer than half of workers have a retirement savings plan.

Yet another study from the Pew Charitable Trusts adds to the bad news. It found that almost half of American households are living precariously, from paycheck to paycheck. Some 47 percent spend all of their income, go into debt or are forced to dip into savings to meet annual expenses. As the New York Times reported, "If a typical middle-class household had to weather a period of joblessness without any income, they would exhaust their available savings within 21 days, the analysis found."

IN HIS State of the Union address, Obama referred to the growing gap between the superrich and the rest of us, and acknowledged the struggles of working-class and middle-class families:

Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better," he said. "But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by--let alone get ahead. And too many still aren't working at all.

All true. But if Obama was committed to shrinking the gap between rich and poor as he claims, you wouldn't know it from his latest budget proposal.

According to a New York Times preview of the administration budget, published before its release, while Obama is proposing a tax on American profits kept overseas, he's also proposing a decrease in the overall corporate tax rate:

The president will also propose a one-time 14 percent tax rate for companies that bring profits home from overseas, with much of the proceeds going to fund infrastructure, like roads, bridges and airports. But that "repatriation holiday" would have to be part of a broader overhaul of the business tax code, the budget will stress. The president will reiterate his call for a business income tax overhaul that lowers the corporate tax rate from 35 percent to 28 percent, and 25 percent for manufacturers.

Meanwhile, Obama's proposals to make two years of community college available for free is likely to be rejected out of hand by the Republican Congress, as are plans to curb tax breaks on individual retirement accounts to raise the capital gains tax.

That illustrates the point in a nutshell: Anyone who wants to see a real reduction in inequality can't rely on the Democrats or the Republicans.

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