Bernie and Reality of Economic Inequality

February 16, 2020

Tags: Bernie Sanders, canners, economic inequality, homeless, Honolulu, New York, piketty, Subway
Posted in: #99Percent, 2020

 
It is a good thing candidates like Bernie Sanders make economic inequality a campaign issue in 2020. But with apologies to the Bernieverse, he is well-meaning but like everyone else has no practical solutions. Bernie, et al, imagine there exists some means to redistribute wealth, most likely, following the economist Thomas Piketty, via a progressive tax on the wealthy. Just talking about that may be enough to scare the wealthy into putsching a corporate Democrat in place of Bernie once again despite the human shield of green-haired pierced volunteers, but even if he were to win he could not be enough to change America. It’s a reality problem.

The reality of wealth is the gap between most Americans and those who sit atop our economy continues to grow. This is nothing new. For two decades after 1960, real incomes of the top five percent and the remaining 95 percent increased at almost the same rate, about four percent a year. But incomes diverged between 1980 and 2007, with those at the bottom seeing annual increases only half of that of those at the top. Then it got worse.

Lower savings and hyper-available credit (remember fraudulent Countrywide mortgages, ARMs, and usurous re-fi’s?) put the middle and bottom portions of society on an unsustainable financial path that increased spending until it crashed into the Great Recession of 2008. Meanwhile, America’s top earners’ wealth grew; the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009 as the markets recovered, while the bottom ninety percent became poorer as their missing homes did not. Their wealth, such as it was, was a Potemkin vision, wealth in the form of their homes which they actually did not own. The recession represented the largest redistribution of money in a century. How did the rich pull this off?

The reality of possession. They own stock and real estate, not just personal homes to live in. Less than half of Americans do not own any stock while the wealthiest of Americans own over 80 percent of all stock, and 40 percent of America’s land. It is worse on an international scale. Only 85 human beings own half of all the world’s stuff. Markets over time go up and those who own parts of them do well. People who do not own homes have to rent them from those that do own. Owners can raise rents as they think they can get away with. A rising tide lifts all yachts, as historian Morris Berman observed. It can be hard to understand this level of wealth; a few years ago the real estate site Redfin figured out Bill Gates could buy all of the real estate in Boston. Candidate Michael Bloomberg could pick up Anaheim. Google’s Larry Page is able to buy Boca Raton. Never mind yachts, they can buy whole cities.

It is the reality of the system. Walmart associates make minimum wage. Most associates are nowhere near full-time, so their take home pay is well below the poverty threshold. Employer-paid Obamacare, such as it is, only kicks in after one works 20 hours a week or more, so following the implementation of that policy most employees were cut to less than 20 hours, meaning they had to juggle multiple jobs to live and still did not have healthcare. They might be working 60 hours a week at three different places but that did not qualify them for healthcare as the qualifying hours are not cumulative.

In return for paying below-poverty wages, Walmart enjoys taxpayer subsidies of $5,815 per worker in the form of food stamps paid by the government to keep the workers nearer the poverty line than below it, and tax breaks given to “create jobs.” On their side of the ledger, a few years ago the top four members of the Walmart family made a combined $28.9 billion from their investments. Less than a third of that would have given every U.S. Walmart worker a $3.00 raise, enough to end the public subsidy, though the four Walmart scions would have to make due with only $20 billion a year. Essentially the interests of the 99 percent are in direct conflict with those of the one percent.

But the real money from economic inequality is made in much bigger bites. Walmart can pay low wages, creating a new status known as working poor, without having to see workers literally starve on the job because their employees receive $2.66 billion in government poverty assistance each year. That works out to about $5,815 per worker, or about $420,000 per store. Food stamps, a generic term for food assistance, are a key part of navigating in and profiting from, income inequality. In one year under study nine Walmart Supercenters in Massachusetts received more than $33 million in food stamp dollars spent at their stores, a fair amount by their own workers. In two years, Walmart received about half of the one billion dollars in food stamp expenditures in Oklahoma. Overall, 18 percent of all food benefits money nationwide is spent at Walmart. That’s about $14 billion.

The reality of the system protects those who make massive amounts of money by owning things, as opposed to working for wages. So let’s Robin Hood those wealthy bastards, Bernie and Elizabeth and others say. Jeff Bezos’ net worth is $109 billion. But that’s everything he has, not just the six percent tax Elizabeth Warren wants him to pay. The net worth of the entire Forbes 400 is under three trillion dollars. That’s everything they all own, as if we killed them and took it. The reforms Elizabeth Warren proposed to address economic inequality will cost some $20 trillion. It does not exist.

But you have to start somewhere, right?  Given that America’s largest companies already pay little to no tax, it is  unclear how such a system would ever be enforced in the long run before the wealthy offshore their money. Taxes still leave in place other factors driving economic inequality, including a system of higher taxes on wages than capital gains, inheritance laws (Money is immortal. The children of rich people are born rich and unless they get really into hookers and blow, will inevitably get richer. They almost can’t help it), and the ability of the wealthy to control wages and the availability of jobs. Unions are increasingly a thing of the past and automation threaten more jobs daily. The rich decide when to pull the trigger on touch screens in fast food restaurants and deep six cashier jobs, never mind the mass extinction driverless delivery vehicles will bring on, and the one after that when advances in AI crush entry-level coding jobs.

The single most significant factor is that financial growth via capital ownership (what the rich do for money) always outstrips wage growth (what the rest of us do to get money.) Getting richer by owning stuff is always a better deal than trying to get rich by working for wages from the people who own stuff. Even if a magic wand reset society somehow, the nature of capitalism would soon set things back on the path to income inequality. This was French economist Thomas Piketty‘s significant finding. Rich people know about this even if poor people don’t. Rich people get money through capital gains, basically assets they buy cheaply becoming worth more over time (until slavery was replaced with the minimum wage, human beings were also considered as a form of capital asset. Seriously, check with human “resources” where you work.) That’s why a short-term downturn is bad for you, ultimately good for most of them. It’s why stock market trouble uninformed people wish for will not make Trump go away. Math!

The only hope lies in the reality of politics, right? Over large swaths of the earth, there are no elections. In some of the wealthiest countries in the Middle East and Asia there is not even the pretext of anyone choosing a government. Most governments are controlled by family ascension, not unlike the Middle Ages or in more modern places corruption and manipulation. Power and wealth work together.

Such is the case now in the United States. According to the once-prescient Lawrence Lessing (who has since lost his mind to Twitter and TDS), with the concentration of wealth, 132 people in the U.S. essentially control elections. They do so by donating, just that handful of people, over 60 percent of the SuperPac money. Those 132 people represent 0.000042 percent of the total number of voters; most other contributions to candidates are small, many below $200. It sounds nice when a candidate talks about it but it diffuses power even as you he owes you something now. It is impossible under such circumstances for government to create laws again the interests of the wealthy; after all, they work for them.

The reality is there is no answer, no solution. That’s because things are working more or less as they are supposed to. From a certain perspective, income inequality means things are going according to the rigged rules. The system is designed to squeeze wealth up into a smaller and smaller group of hands. A by product is the creation of more and more poor and eventually homeless at the bottom. It is the inevitable end point for a society set up to fund the wealthy via capital appreciation by paying low or stagnant wages to everyone else.

To say it can’t be is to ignore the last time in history when it sort of was, one king in one castle sustained by tens of thousands of serfs living in sloven conditions. The world has seen this before, for the West, during the Middle Ages, when feudalism was the dominant force. A very, very few owned most everything of value. The 99.999 percent majority — serfs then, valued Target associates now — worked for whatever the feudal lords allowed them to have.

Of course this is all very wrong. It’s very American to believe there are always answers, that there are not forces stronger than change at work, especially in an election year. If you’re still looking for those answers — solutions — well, you’ve gotten to the end of the article.

Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.