Monday, March 24, 2014


Chuck Collins - co-author of "Wealth and our Commonwealth: Why America Should Tax Accumulated Fortunes" -  has an article that explains how wealth inequality is "wrecking the world" and what we need to do to address the issue in the United States.

Wealth Inequality in the United Kingdom

To help make his point Collins starts by telling us that by 2010 at least 25 of the largest 100 corporations in the United States were paying their CEO more than they paid in U.S. taxes. Worse, we learn that the top 1 percent took home over 21 percent of our nation's total income in 2010, which was up from 8 percent in 1979.

How did this wealth shift happen? Collins makes it clear that mysterious market forces, or the logic of the invisible hand, had little to do with these developments. Rather, the game is now rigged to favor those who are already wealthy.

More specifically, Collins writes:

“The rules of the economy have been changed to benefit asset owners at the expense of wage earners, and these rule changes have benefited global corporations at the expense of local businesses.”

As evidence of these changing rules Collins writes that between 2001 and 2010 the U.S. borrowed more than $1 trillion to give wealthy tax payers earning more than $250,000 "substantial tax breaks, including the 2001 Bush era tax cuts".

However, as I never tire of pointing out in class, when it comes to thinking of new ways to pay back the $2.7 trillion that the federal government has "borrowed" from the social security fund we're told that America is broke.

How did we get to the point that we borrow trillions and give tax breaks to those who already have millions of dollars, but then turn around and tell the American worker that built the social security surpluses "tough luck, you're going to have to learn to do more with less"?

Economists Emmanuel Saenz and Thomas Piketty make it clear that our economic problems started when we shifted our economy's focus from building good products, offering sound services, and market innovation to simply borrowing money so we could gamble on financial products (i.e. the "financialization" of the American economy). When the Federal Reserve offers our nation's largest financial players near zero interest rates (0.1 percent) but then tells you and me that we have to accept whatever rate the banks offer there's something wrong in America.

The impact this shift has had on our lives can't be understated. The fact that the top 10 percent of income earners in America now take home over 50 percent of all national income tells us that something is awry in America.

Perhaps the biggest problem according to Collins is how growing wealth inequality has "distorted all the arenas of life that matter" in America. Today we are seeing the erosion of support for community institutions that are middle-class pillars, like public schools, public libraries, public parks, and public infrastructures. The flip side of this coin is a society whose embrace of mindless individualism is only matched by the glorification of financial institutions that, ironically, have had a field day feeding at the public trough of public bailouts, cheap money (thank you Alan Greenspan), and favorable legislation.

The end result is a general reluctance to see the world as it is.

How do we fix these problems? Chuck Collins has several common sense suggestions, which include taxing the top 1 percent at the same rates we did in the 1960s, reining in CEO pay, breaking up the big banks, and putting an end to corporate tax dodging (no more tax havens in the Cayman Islands), among others.

There's more, which you can check out here. But make no mistake. We are in trouble. The status quo is not sustainable.

- Mark 

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