Thursday, November 14, 2013


Last night at a Bakersfield screening for Robert Reich's documentary "Inequality for All" I was asked to lead a Q&A with the audience after the show. The documentary was full of information that got many in the audience thinking about the reckless direction of our economy and society, and what we need to do to turn things around.

Among the first points made by Reich in the film was how the top 1 percent of America has seen their share of income swing radically upward since the 1970s. Specifically, in a span of 30 years it more than doubled, and reached levels not seen since right before the Great Crash of 1929.

For Reich the swing in income looks very much like a suspension bridge ...

I noted during the Q&A that the top 1 percent of wage earners believe that their income gains are "earned" because - if we are to believe their argument - they are smarter, harder working, and more deserving, among others. Conversely, if your income and financial situation has stagnated or worsened - as is the case with America's middle class - it's because you are not smart enough, hard working enough, and less deserving. Worse, many are viewed as whiners and moochers.

Both assumptions are simply not true.

Let's make this real simple. The rich are getting richer because of legislative favors that include tax gifts, deregulation, state sponsored globalization (Bretton Woods / Treaties), state supported outsourcing (tax inducements), technological advancements that facilitate outsourcing, manipulation of the law, a string of market bailouts, artificially cheap money, and many other developments that have nothing to do with being harder working or smarter than middle-class Americans.

Put another way, as I point out in my book, the state creates the conditions under which wealth is created. The fact that the rich have gotten richer because of favorable legislation, regular bailouts and deregulation tells me that they should pay more to the state that helps their riches grow.

Put more bluntly - and following Reich's cue during the film - one of the things that we need to do is raise taxes on the top 1 percent of wage earners. I made this point during the Q&A.

Towards the end of our Q&A discussion one of the last questions of the evening was about raising taxes on the richest Americans. The person asking the question was curious as to why it's always mentioned that we need to raise taxes on the top 1 percent. I answered by noting that we have bills to pay, and that the real issue is one of fairness. I left it at that since we were at the end of our evening discussion.

I should have said more. This is what I would have added with more time.

I would have made it clear that the richest Americans need to pay more than they do now (15-20 percent on capital gains, and 39.6 percent marginal rate on other income) because they have been enjoying state supported successes that you and I help to subsidize with our taxes. Think about the following:

1. SOCIALIZED LOSSES: Investors enjoy built in tax advantages for making investments. If they sell their stocks at a loss they can deduct it as a capital loss from their next tax bill. You and I pay for this. Nice.
2. SOCIALIZED LOSSES, II: Did you know that if an investors' losses are so big and they can't use them all in one year they can carry them forward so that they can be applied to another year? It's part of the carry forward law. You and I also pay for this.
3. BAILOUT FEVER: One of the lessons of capitalism is that if you make stupid decisions you're supposed to lose your money. Not so under our current system (see #1 and #2 above). Thanks to a series of market bailouts for Wall Street our nation's biggest market players have seen their financial portfolios surge rather than tank. You and I backstopped the bailouts.
4. CHEAP MONEY: Thanks to Alan Greenspan and the Federal Reserve the biggest financial players have been able to access dirt cheap money. Specifically, because of the Greenspan Put every time market players make a mess of things the Fed is there to push cheap money into the market for the nations biggest financial institutions. You and I pay for the gambling and market crashes that occur because of the cheap money.
5. INCOME IS INCOME. Why should income from investments be taxed at a lower rate when the income that I make - after investing years and money into getting my degree - is taxed at two (and perhaps three) times the rate that the richest Americans pay?  

Seriously, apart from being granted favorable legislation and deregulation gifts, where's the fear of losing money in the market if your investments and market bets are backstopped with tax favors, bailouts, and artificially cheap money?

Put more simply, those who have made a lot of cash in this fixed market environment need to help pay the trillion dollar tabs that we've run up while subsidizing their "market" successes.

How simple has it been for America's richest class to make money? Think about this. Things have been rigged in the favor of the top 1 percent to such a degree over the past 30 years that a monkey throwing darts could have made money in the market.

Seriously, click on the link here to learn about monkeys making money in the market.

Do yourself a favor and watch Robert Reich's "Inequality for All." And bring a notebook. There's so much information (and that's a good thing) that you might regret not bringing it (or buy the DVD when it comes out) ...

If you you live in Bakersfield there will be showings at the Maya Theater on Thursday (11/13) and Saturday (11/15).

- Mark 


R. M. said...

This guy was on the Daily Show just a few months ago. That's where I first heard of him.

Anonymous said...

A solid, well reasoned rebuttal to Reich's six points. I'd love to get some feedback from anyone.

Anonymous said...

Most of this is the same propaganda which does not hold up to true statistical data, or even just a quick glance at history. I will need more to look at before you will be considered to be more than just point of view.