A couple of news items got me riled up today. First there was the report from the IRS the other day that the top 1% of income holders in this country took home the largest percentage of overall income ever. I believe it was 19.3% of all income was "earned" by the top 1%. This is higher than the percentage earned by the top 1% in 1927, which had been the previous high.
There have been three eras in this country's history with high income inequality. They are the late 1800's, the days of the robber barons; the 1920's, the Great Gatsby era; and the present beginning with the Bush years of 2001-2009 and continuing even now under Obama.
Each of these periods were marked by economic stagnation and eventually resulted in an economic freefall. Economic historians now refer to the years from 1873-1893 as the "Long Depression". Unemployment would have averaged over 14% by modern standards, and income remained flat. But the robber barons built fortunes and mansions in Newport aided by government repression of unions, and reckless and wild speculation over gold and silver and railroad lands.
The 1920's, where President Calvin Coolidge proclaimed "the business of America is business", and lax laws and regulations allowed wild speculation and overlapping financial institutions under the same corporate umbrella, resulted of course in the stock market crash of 1929 and the Great Depression.
More recently the derivatives market speculation, aided by deregulation that undid many of the protections enacted after the Great Depression (as in repeal of Glass-Steagall) and laws forbidding oversight of risky derivatives, led eventually to the great downturn of 2008, the worst economic collapse since the Great Depression. Up to that point the rules and laws allowed so many Wall Street people and bankers to suck billions of dollars of profit out of the economy on wild speculation, while incomes of the average Americans remained stagnant.
Which brings us to the second item. Today marks the 5th anniversary of the Lehman Brothers collapse and the beginning of the Wall Street crash and economic collapse of 2008. While Wall Street and the banks and the 1% are back on their feet and doing as well as they were before the downturn, most of the rest of the country continues to struggle. Of course the fact that the rest of the country bailed out Wall Street and the large banks to save them from their own reckless losses didn't hurt in that respect. They had grown too big to fail. If they went under they would drag everything else down the drain with them. So out of necessity they were bailed out albeit undeservedly.
But to what effect? Were they chastened? Humbled? Hardly. To the contrary, their hubris is back and they use their taxpayer subsidized millions and billions to lobby Congress and prevent any meaningful reforms or protections from being enacted or enforced. And if any law does makes its way on the books they use their millions of lobbying dollars (and friends in Congress) to water down the regulations and enforcement to near meaninglessness.
So this anniversary has me fired up today. When FDR got into office after the Great Depression he made sure new laws and regulations were enacted that served to protect the economy from too much concentration (too big to fail) and reckless speculation. These rules served us well for about 70 years. They were jettisoned in the 1999-2000 timeframe (combination of Republicans in Congress and "new" Democrats like Larry Summers) and less than 10 years later, voila, there we were again.
So we continue to follow tax and financial laws and regulations that keep moving more and more dollars into fewer and fewer hands at the top. It's not sustainable. It chokes off economic growth and equality of opportunity. And it threatens not only the economy but democracy as well. One of the few reasons why I feel optimistic we will change this is the previous statement "it's not sustainable". It's a house of cards that will eventually fall. The problem is it is the tens of millions of average Americans who will pay the price, not the 1% who will have enough fortune amassed to survive quite nicely. And it's the generation suffering through stolen opportunities who pay the price.
There have been three eras in this country's history with high income inequality. They are the late 1800's, the days of the robber barons; the 1920's, the Great Gatsby era; and the present beginning with the Bush years of 2001-2009 and continuing even now under Obama.
Each of these periods were marked by economic stagnation and eventually resulted in an economic freefall. Economic historians now refer to the years from 1873-1893 as the "Long Depression". Unemployment would have averaged over 14% by modern standards, and income remained flat. But the robber barons built fortunes and mansions in Newport aided by government repression of unions, and reckless and wild speculation over gold and silver and railroad lands.
The 1920's, where President Calvin Coolidge proclaimed "the business of America is business", and lax laws and regulations allowed wild speculation and overlapping financial institutions under the same corporate umbrella, resulted of course in the stock market crash of 1929 and the Great Depression.
More recently the derivatives market speculation, aided by deregulation that undid many of the protections enacted after the Great Depression (as in repeal of Glass-Steagall) and laws forbidding oversight of risky derivatives, led eventually to the great downturn of 2008, the worst economic collapse since the Great Depression. Up to that point the rules and laws allowed so many Wall Street people and bankers to suck billions of dollars of profit out of the economy on wild speculation, while incomes of the average Americans remained stagnant.
Which brings us to the second item. Today marks the 5th anniversary of the Lehman Brothers collapse and the beginning of the Wall Street crash and economic collapse of 2008. While Wall Street and the banks and the 1% are back on their feet and doing as well as they were before the downturn, most of the rest of the country continues to struggle. Of course the fact that the rest of the country bailed out Wall Street and the large banks to save them from their own reckless losses didn't hurt in that respect. They had grown too big to fail. If they went under they would drag everything else down the drain with them. So out of necessity they were bailed out albeit undeservedly.
But to what effect? Were they chastened? Humbled? Hardly. To the contrary, their hubris is back and they use their taxpayer subsidized millions and billions to lobby Congress and prevent any meaningful reforms or protections from being enacted or enforced. And if any law does makes its way on the books they use their millions of lobbying dollars (and friends in Congress) to water down the regulations and enforcement to near meaninglessness.
So this anniversary has me fired up today. When FDR got into office after the Great Depression he made sure new laws and regulations were enacted that served to protect the economy from too much concentration (too big to fail) and reckless speculation. These rules served us well for about 70 years. They were jettisoned in the 1999-2000 timeframe (combination of Republicans in Congress and "new" Democrats like Larry Summers) and less than 10 years later, voila, there we were again.
So we continue to follow tax and financial laws and regulations that keep moving more and more dollars into fewer and fewer hands at the top. It's not sustainable. It chokes off economic growth and equality of opportunity. And it threatens not only the economy but democracy as well. One of the few reasons why I feel optimistic we will change this is the previous statement "it's not sustainable". It's a house of cards that will eventually fall. The problem is it is the tens of millions of average Americans who will pay the price, not the 1% who will have enough fortune amassed to survive quite nicely. And it's the generation suffering through stolen opportunities who pay the price.
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