Many news columnists in the financial world are clamoring that Obama’s actions toward the economic meltdown is a “Socialist” or “Quasi-Socialist” maneuver to redistribute wealth (to the poor) in this nation.
You may even have heard the CNBC’s Rick Santelli’s tirade about bailing out the middle class, “Who here (on the floor of the Wall Street monetary exchange) wants to bailout homeowners who have houses with an extra bathroom?”
In order to understand whether this is true, and even, if this MUST occur, one must look at how Capitalism has worked in the past thirty years. This begs the question, are the wealthy too wealthy? Is the gap between the wealthy and the middle class too wide?
Beginning around the year 1980, let us compare how wealth has been distributed, starting with the middle class.
In the summer of 1981, just months into his Presidency, Ronald Reagan destroyed the air traffic controllers' union, PATCO, in a lengthy and bitter strike. It was a seminal moment in American economic history though it wasn't perhaps clear at the time. A union had been broken but PATCO wasn't just any union, it was a white collar union more like a guild or a professional association. Its members were part of the middle class and breaking a union of this type would foreshadow the assault on American labor waged by conservatives who while professing to love "people" fail to mention how much they hate workers.
The minimum wage in America reached its high point in the late 1960s in terms of real buying power, and though it stagnated in the 1970s as inflation hit the minimum wage thereafter went into a deep and steady free fall of more than 29% decline in buying power under Reagan during the 1980s. Even as late as 1980, the minimum wage was on a par with the poverty level. By 1990, the minimum wage was 30% below the poverty level. Clinton would bring a measure of relief but even then by 2001 when he left office, in real terms, the minimum wage was worth 21.4% less.
More than ten million Americans earn the minimum wage and contrary to Republican propaganda most are not teenagers. In fact only 28% of minimum wage earners are teenagers, the single largest category is single mothers (34%) followed by men as head of household. But even beyond this is the stark reality that the legacy of the Reagan Revolution is a decline in real wages and a rise in social inequality. That's the legacy of conservatism. For most Americans, it is a record of failure. 45 million workers make less than $10 an hour, which is below the poverty level for a family of three working full time.
The real average hourly wages of more than a hundred million American workers are less today than they were 28 years ago. Even the real wages of college educated workers have risen only modestly since in the late 1980s with the gains of the Clinton years all but erased during the Bush years. In one of the most astonishing statistics from the Bush years the only group to show inflation-adjusted take home pay income gains among American workers were just the 3.4% of Americans with doctorates and professional graduate degrees (JD's, MBAs, & MDs). Everyone else lost out but the burden has fallen hardest on the poorest of the poor, the 10 million lowest paid workers whose purchasing power has declined by approximately 21%.
So how does one make up for falling wages? Well, one works longer hours. Among the 30 OECD countries, only in South Korea, Poland and in the United States do workers work more hours today than they did in 1979. In 2005, the average worker put in 1,805 hours up 61 hours over 1979 levels.
But it gets worse. As a family unit, while real wages of male workers as heads of households in the US have fallen, the American family has worked longer hours by adding more family members to the workforce. Since 1973 this increase in family average hours worked is the equivalent of adding 5 months of work in a year to the 2080 hours. Wives in working families have assumed the major share of this increase in total family hours worked, contributing more than 500 additional hours of work per year. But the male worker in the family has also worked more overtime hours, and both husbands and wives have taken on second part time jobs as well. All three developments add up to the 5 additional months of work American workers' families now work in order to offset declining hourly wages and just to make ends meet. Conservatives who preach "traditional family values" espouse economic policies that actually prevent families from spending time together.
Between 2000 and 2007 the average middle class wage increase has been 1.7% per year, nearly 2% LESS than inflation. Even though the middle class has seen SOME wage increase, they actually have LESS buying power.
At the same time as wages were stagnating, though, a few Americans were clearly getting richer. In 2006, the share of corporate profits in national income was higher than at any time since 1947. And the inequality was not only reflected in the behavior of profits. The share of wage income reported in the very top one percent of US tax returns in 2005 was almost double that recorded in 1980. Their share of total US income has jumped from under 8% to 15%. It seems that conservatives love some people more than others, or perhaps more aptly put, their policies are designed to reward 3 million Americans at the expense of the rest of us.
Now, let’s look at the wealthy class starting around 1980. “In the upper reaches of American society there is an explosion on personal wealth like never before.”
CEO’s today make 475 TIMES the wages of the average worker. In 1929 it was 340 TIMES the wages of the average worker.
Today (2008) according to the Federal Reserve, 49,000 U.S. households now have between $50 MILLION AND $500 MILLION DOLLARS in net worth. That is an AVERAGE equivalent to 220,500,000 $50,000 per year incomes or 731,100,795 yearly minimum wage jobs.
Additionally, today (2008) according to the Federal Reserve, there are 125,000 households that are worth between 25 MILLION DOLLARS and 50 MILLION DOLLARS. That is an AVERAGE (37.5 MILLION) equivalent to 93,750,000 $50,000 yearly incomes or 310,842,175 yearly minimum wage jobs.
Over the next 50 years, the wealthiest Americans will leave behind roughly 27 TRILLION DOLLARS. That is more than TWICE the U.S. TOTAL national debt as of today.
The richest 1% of Americans control MORE WEALTH than 90% of the ENTIRE U.S. population. That equates to 3 million Americans controlling more wealth than 297 million Americans COMBINED.
In 1985 there were ONLY thirteen BILLIONAIRES, today there are more than 1,000 BILLIONAIRES. That is nearly 85 (850%) TIMES more billionaires in the U.S. in twenty-five years. The AVERAGE wealth of those more than 1,000 billionaires totals more than 3.4 TRILLION DOLLARS. That AVERAGE would be the equivalent of 1.511 million $50,000 PER YEAR JOBS FOR (the lifetime wages) 45 YEARS or more than 50 million minimum wage jobs for 45 YEARS.
In 1980 “Hedge Fund” managers would make approximately the same as a good lawyer in a top firm, or a highly skilled doctor, or top Wall Street Analysist. The top 25 “Hedge Fund” managers in 2007 made AN AVERAGE of 877 MILLLION DOLLARS in 2007 alone. By contrast, the TOP neurosurgeons in this country makes an average of 2.7 million dollars.
The average income FOR ONE “hedge fund” manager is equivalent to 17,540 $50,000 per year jobs or 58,156 minimum wage jobs. The combined 25 “Hedge Fund” managers income totaled almost 22 BILLION DOLLARS IN 2007 ALONE. The top 25 “Hedge Fund” managers made 5 TIMES as much as they made in 2001, and more than 400 TIMES as much as they would have in 1980. That total income for the top 25 “Hedge Fund” managers for one year would be equivalent to 438,500 $50,000 per year jobs or 1,453,912 minimum wage per year jobs. The mediocre “Hedge Fund” manager made between 30 and 120 MILLION DOLLARS in 2007.
There are now more than 5 million millionaires who do NOT feel wealthy compared to the “super-rich.” Their net worth is usually from several million dollars to 15 million dollars. This group of millionaires is now commonly called “middle-class millionaires.”
The top executives of the FAILED AND TROUBLED BANKS in 2008 received a TOTAL of 3.2 BILLION DOLLARS IN BONUSES in 2008. That is equivalent to 16,000 $200,000 home mortgages.
Some even become wealthy catering to the Wall Street wealthy. Phil Fisher and his travel agency charges $100,000 JUST to become a client of his travel agency services and $25,000 per year JUST to retain client status to the service. The actual services are extra. For example he rents villas in the Turks and Cacaos islands from $2,200 PER DAY to more than $10,000 PER DAY. He even declares, “There are more clients than places to go.” He catered a wedding in Florence that his charges alone came to $15 million.
At Saks Fifth Avenue in New York City, where one can purchase $2,200 pump shoes, Saks Fifth Avenue expanded their shoe department. The shoe department alone is now SO LARGE it has it’s OWN zip code.
At a recent store opening (2008) in New York City, Gucci featured $18,000 handbags while a travel trunk had a $250,000 price tag. Watches started at $10,000 and the highest priced watch was selling for $800,000.
Private jet sales in 2007 were 34% higher than in 2001. 15 Central Park West in Manhattan has 200 luxury condo apartments that AVERAGED a cost of 10 MILLION DOLLARS EACH in 2007. One “Hedge Fund” manager spent 49 MILLION DOLLARS for his Penthouse apartment.
It is CLEAR that the NEEDED shift in wealth in this country is FAR OVERDUE. That shift was even defined by Reagan himself. It was called the “trickle down” theory. The PROBLEM IS, nothing trickled down in the past 29 years. It only trickled UP.
When someone states this “re-distribution” of wealth to the middle-class is “Socialism” IT IS A LIE and you now have the factual data that SHOWS it is NOT SOCIALISM. It is much needed fair, re-balancing of the wealth in a CAPITALIST Society.
It is THE WEALTHY who desperately WANT to maintain the status quo of the “super-rich” and the rest of us. It is the GREED propaganda machine working overtime.