The United States is becoming a Third World country – where the rich get richer, the poor get poorer and the middle class have to work like dogs to remain middle class. Health care is unaffordable, private sector pensions are sparse, inflation is rampant and jobs that pay a living wage are few and far between. One percent of the country now controls 50% of the wealth and while CEO’s typically made 15 times the wage of their workers in 1960, it is not unusual now to see a CEO pulling down 400 times this wage today. The main culprit is the low tax rate on the superrich. What is needed is a tax of 90% on wages and capital gains over $5,000,000 annual income. While this may seem extreme, this situation existed during the Presidency of Dwight Eisenhower (a Republican) – after adjusting for inflation.
The low tax rate on the superrich has encouraged them to pillage the country. Leveraged buyouts (using taxpayer-backed money) of viable companies enabled investment bankers to raid pensions, slash health benefits, reduce wages and move jobs overseas. Elite athletes become multimillionaires while billionaire owners of sport franchises punt the cost of stadiums to the taxpayers. Politically connected corporations receive sweet heart contracts in Iraq and Afghanistan while our young men and women spill their blood in wars we cannot win. For the past 30 years, hedge funds and banks have made imprudent loans to sovereign nations and real estate speculators, only to be bailed out and the bill given to the taxpayers.
These trends culminated in The Great Recession of 2008. But unlike the Depression of the 1930s, no attempt has been made to protect the average citizen. Hedge funds and politically connected investment banks such as Goldman Saches and Citibank were bailed out while our children and grandchildren received the bill. Even worse, the Dodd-Frank bill insures that future bailouts will not need the consent of Congress. Meanwhile, the Chairman of the Federal Reserve, Janet Yellen, is artificially keeping interest rates low so that the politically connected superrich can speculate with impunity, creating asset bubbles in commodities and in the stock market. Senior citizens, who have saved their entire lives, cannot find a safe investment that yields 2% a year! Yet, American taxpayers are bailing out Greece, Ireland and Portugal to the tune of billions. In fact, American banks and hedge funds bought worthless Greek bonds paying 22% knowing full well that our political class will give the taxpayer the bill.
Increasing taxes on the super rich will not significantly increase the coffers of the Government. But it will change behavior. To allow the present system to continue will cause political instability.
In the past, politicians who allowed this to happen were obliterated in the polls. No more. With the advent of radio, television and the Internet, campaigns are tremendously expensive. Our politicians, regardless of ideology, must grovel before the people who created this mess. The only ones who can compete are the superrich themselves, who have not intention of changing the system. The superrich believe – to paraphrase Abraham Lincoln – “You can fool all of the people all the time if you raise enough money. “ While the American people passively accept this state of affairs remains to be seen.