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Entries tagged "Inequality"Page Previous 1 • 2 • 3 • 4 • 5 • 6 • 7 Next
February 2, 2012 · By Emily Schwartz Greco
"I'm not concerned about the very poor." Oops. Mitt Romney messed up. Again. This was a bigger "oops moment" for Romney than when he said a few weeks ago that the $374,327 he earned in speakers' fees over the course of 12 months amounted to "not very much." It was bigger than "I like being able to fire people." It was the biggest since he blurted out that "corporations are people, my friend" at the Iowa State Fair.
Call it a Freudian slip, call it overconfidence emerging from a big win in the Florida Republican primary, call it a classic, out-of-touch-sounding "Rich Romney" gaffe. It may be all of those things, but this comment represents a scripted piece of the Romney campaign strategy. He hopes to co-opt an Obama campaign message aimed at appealing to the middle-class voters each will need in the general election.
Due to CNN.com's editorial policies, we're unable to post the whole thing here. But please read it on their website, and check out some of the 1,800 comments logged so far. Since too many of them are unsympathetic toward the poorest among us, be sure to weigh with your two cents, and spread the word via Facebook and Twitter.
Update: Many conservatives are attacking Romney in the wake of this gaffe. The Daily Kos has a fantastic summary. Here's a sample quote from National Review's Jonah Goldberg: "His language makes him seem like a caricature of a conventionally stiff country club Republican."
What a difference a week makes. GOP presidential hopeful Mitt Romney finally disclosed on Tuesday that he paid a measly 13.9 percent of his vast income in taxes in 2010 and will probably pay just 15.4 percent on his 2011 earnings. Those rates are far lower than what the IRS demands of you, or the two of us, or Warren Buffett's secretary.
Thanks to the persistence of the Occupy movement and Romney's tin ear, the anger over inequality, recent college grads who can't pay their student debts, and elderly people being thrown out of their homes is boiling over into outrage.
Thanks to this pressure, President Obama devoted much of his State of the Union address to the damage extreme inequality wreaks on our democracy. IPS experts John Feffer, Phyllis Bennis, Sarah Anderson and John Cavanagh all offer their takes on this important speech.
At IPS, we're spreading the stories, facts, and figures about our nation's 30 year march toward extreme inequality in as many ways as we can. IPSers Chuck Collins and Sam Pizzigati have built the leading inequality website. (Please visit www.inequality.org to see what we mean). Chuck's latest book 99 to 1: How Wealth Inequality Is Wrecking the World and What We Can Do About It will be released shortly before Tax Day, and he's a featured expert in "We're Not Broke," a new documentary that premiered on Sunday at the Sundance Film Festival, which highlights the growing public outrage toward those in the 1 percent who are key drivers of inequality. Too Much, Sam's weekly newsletter, highlights news and views that show how our world would be considerably more caring, prosperous, and democratic if we narrowed the vast gap that divides the wealthy from everyone else.
As the outrage grows, change that seemed impossible not long ago becomes possible. IPS is working with the National Nurses United union and a wide range of groups in this country and around the world to build support for a tax on speculative Wall Street trades, which could raise hundreds of billions of dollars for urgent needs, such as jobs and climate programs. The Institute is working with other allies to lay out the shift from a Wall Street casino to a green Main Street economy.
Remember, Wall Street banks and global corporations have driven down wages, working conditions, and environmental standards both in the United States and everywhere else. We need solutions that cross borders. That's why IPS is working with allies around the world — from Occupy Nigeria to groups fighting the U.S. drug war.
A movement for the 99 percent is growing like wildfire, and each and every one of you is part of it.
This post was originally sent out to IPS supportes in our biweekly Unconventional Wisdom Newsletter. Sign up for UW and other IPS newsletters here.
While we’re still waiting for actions to match his rhetoric, President Barack Obama made three critical points in his big speech about the problem of inequality—a problem that the Occupy movement has pushed into the public consciousness.
1. The Rules are Rigged in Favor of the Rich
Early in his address, the president said that “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”
Despite the popular myth that the rich are rich solely because of their hard work and talent, in reality, much of the explosion of wealth at the top is a result of the rich rigging the rules.
Case in point: rich people, who make most of their income on the stock market, pay a far lower tax rate than ordinary Americans. Warren Buffett pointed this out several years ago when he offered a million dollars to any CEO who could prove he paid a higher tax rate than his secretary. Not one came forward.
In a brilliant stroke of political theater, Obama invited Buffett’s secretary to sit with the First Lady during the speech. This came just hours after Mitt Romney revealed he had paid only a 13.9 percent rate on his 2011 income taxes—thanks to the deep discount rate of 15 percent for financial earnings, compared to the top rate of 35 percent for income from actual work. Obama proposed a minimum tax rate of 30 percent for people who make more than one million dollars a year.
2. We Have Tackled Extreme Inequality Before
A century ago, the rich were enjoying the so-called “Gilded Age” with extreme levels of inequality. Starting in the mid-1930s, in the depths of the Great Depression, our government, pressed hard by a militant labor movement, raised taxes on the rich, protected worker rights, and began a four decade march toward much greater equality. By speaking of “restoring an economy where everyone gets a fair shot,” Obama reminded Americans that our current levels of inequality, which rival those of the Gilded Age, are hurting tens of millions and degrading our democracy, and that we know how to reduce extreme inequality in this country.
3. The Occupy Movement is Not About Envy
The president also effectively rebutted the common conservative argument that all this Occupy ruckus is about nothing more than petty jealousies. “When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference – like a senior on a fixed income; or a student trying to get through school; or a family trying to make ends meet.”
Obama’s sharp rhetoric is an important contribution to the public discourse about inequality. Yet deeds are stronger than words. And right now, Obama is not expected to include the millionaires tax increase in the budget he delivers to Congress next month. For the millions of young people who joined the Occupy sites last fall because they can’t find jobs nor pay off their student loans, Obama weakly admonished colleges not to raise tuitions. No word of what many of those students demand, namely that they not be required to repay those loans until they have incomes.
No real relief from Obama for the millions of Americans who can’t pay their mortgages. He said he was proposing a small fee on the big banks to help pay for a program to allow homeowners to save on their mortgages by refinancing. This is small compared to what is needed: a reduction in the principle on those mortgages down to what the market says they are worth.
So, the challenge to the American people remains huge. Yes, we now have a President who is talking about the obscene inequality that is ripping this country apart. Yet, it will only be through massive pressure from below that bold measures to tax Wall Street, tax corporations, tax the wealthy, and tax pollution get enacted.
And, while Obama talks of wind farms and other green jobs, he still is not articulating a bold vision to transform this nation’s economy from a war economy still addicted to fossil fuels to a green Main Street economy that creates jobs while advancing ecological balance. The Congressional Progressive Caucus has released an Act for the 99% that included some of this vision, particularly for millions of new jobs paid by a fairer tax system.
We all know that thirty years of deregulating Wall Street and lowering tax rates on the rich won’t be undone quickly. For years, Wall Street has crashed the economy and corrupted our politics. Only bold, transformative vision and action can restore our democracy and improve the lives of our people.
Sarah Anderson and John Cavanagh wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions.
January 23, 2012 · By Sam Pizzigati
Egalitarians seem to be doing a lot of praying since Saturday's GOP primary in South Carolina. If you listen closely, you can almost hear their prayer: Please, Lord, let Mitt Romney win the 2012 Republican Presidential nomination.
Why this swelling of affection for one of the richest Americans ever to run for the White House? Over recent weeks, Mitt Romney has put a long-overdue “human face” on American plutocracy at its job-destroying, tax-avoiding worst.
Thanks to Mitt Romney, millions of Americans now understand how private equity kingpins funnel fortunes — to themselves — out of middle class misfortune. And millions more, thanks to Mitt’s on-the-stump candor, now have a window into the world of people so rich that $370,000 — Mitt’s income from speaking fees last year — rates as “not very much.”
Every day seems to bring another “teachable moment” on plutocracy from the Romney campaign: the intricacies of the “carried interest” loophole one moment, the allure of Cayman Islands offshore tax havens the next.
All of this came before Mitt released his tax returns. That release, now expected tomorrow, will only redouble the scrutiny. Mitt has, to be sure, already spilled his basic tax return beans. His overall federal income tax rate last year, Romney has shared, hovered around only 15 percent.
Mitt's campaign as a teachable moment machine does have one other fantastic advantage: Matt had a wealthy father. Even better, Mitt’s wealthy father, American Motors CEO George Romney, released 12 years of his tax returns when he ran for the 1968 GOP Presidential nomination.
These papa Romney tax returns offer a window of their own — into just how amazingly rich people-friendly America’s current tax code has become.
From 1955 through 1966, George Romney reported income of $2.97 million — about $22 million in today’s dollars — and paid 36.9 percent of that in federal income tax.
George in his heyday rated as one of America’s highest income-earners. In 1960, his rewards from American Motors helped bring his total personal income to $661,423, a bit over $5 million today. The IRS only counted 533 taxpayers who made between $500,000 and $750,000 in 1960 — and only 508 taxpayers in the entire country who made more than $750,000.
How did George Romney’s tax rate compare to the tax rate of his fellow rich? George actually paid a smaller share of his income to Uncle Sam than his peers, mainly because he donated almost a quarter of his income to charity and church.
America's 1960 rich in George's $500,000-to-$750,000 cohort — a range that would equal from $3.8 to $5.7 million today — paid an average 45.3 percent of their incomes in federal taxes, after exploiting every tax loophole they could find.
The true millionaires of 1960 — the 306 taxpayers who reported at least $1 million in income, the equivalent of $7.6 million today — paid taxes at a slightly higher rate, 45.8 percent. These millionaires only averaged, in today’s dollars, about a little over $15 million each in income.
How does that $15 million average for America’s richest in 1960 compare to the income of America’s richest today? The 1960 rich, even after adjusting for inflation, only made a tiny fraction of the incomes our rich today are pulling down. Last spring, the hedge fund industry trade journal reported that America’s top 25 hedge fund managers averaged $882.8 million — each — the year before.
The top 25 hedge fund manager federal income tax rate most likely floats between 15 percent — the same rate Mitt pays his taxes at — and 18.1 percent, the average federal income tax rate on America’s 400 richest taxpayers in 2008, the most recent year with IRS data available.
So let’s review the bidding here. Today’s top hedge fund managers make 59 times more income than the richest Americans in 1960, after taking inflation into account. Yet the richest Americans of 1960 paid three times more of their income in federal income taxes than today’s top hedge fund managers pay.
Statistics as revealing as these haven’t yet filtered into America’s political consciousness. But just wait. If Mitt Romney gets the Republican nod, the wonderfully illuminating national seminar on inequality that his campaign has become will be running, glory be, straight into November.
This article originally appeared on Sam Pizzigatti's Too Much Newsletter.
January 4, 2012 · By Salvatore Babones
In 2012, the 63 million Americans who depend on Social Security are getting their first cost-of-living adjustment (COLA) in three years: a 3.6 percent increase in benefits. In other words, one in five Americans are getting a raise. For the average beneficiary, this amounts to an extra $38.95 a month.
That's not much, but it's something.
For workers earning the federal minimum wage, the COLA for 2012 is…zero. Washington raised the minimum wage to $7.25 on July 24, 2009, and there it stands. There's no regular COLA for the federal minimum wage. (Eight states, which set their own minimum wages slightly higher than the federal level, are raising them in 2012.)
COLAs are necessary because inflation constantly changes the dollar's value. A dollar today isn't worth the same as a dollar yesterday. The year-to-year changes are small, but over time they add up. The Bureau of Labor Statistics estimates that it costs $4.58 today to buy what a buck bought in 1974.
Because of inflation, payments for government benefits can't be set once for all. Most federal programs have some kind of built-in mechanism to update dollar amounts for inflation. For Social Security, benefits have been indexed to changes in the Consumer Price Index (CPI) since 1974.
No Adjustment System
While federal benefit programs like Social Security are indexed for inflation, the federal minimum wage isn't. It only gets adjusted whenever Congress and the White House get around to it. As a result, the minimum wage has only increased seven times in the past 30 years.
Back in 1974, when COLAs for Social Security were first indexed for inflation, the federal minimum wage was $2 an hour. If the minimum wage had also been indexed to the CPI, the inflation-adjusted minimum wage today would be $9.16 an hour.
If the federal minimum wage had been updated since 1974 using the Social Security yardstick, it would now stand at $10.74 an hour.
In other words, after adjusting for inflation minimum wage workers today are paid less — about 26 percent less — than they were in 1974.
But that's not the end of the story. The Social Security COLA is an adjustment made for people who are already receiving benefits. People's benefit levels are determined at the point of retirement by the average wages they earned over the course of their working lives.
Because of inflation, it's not fair to lump wages earned in the 1970s with wages earned in the 2000s. The earlier wages have to be adjusted to make them comparable with recent wages. But the Social Security Administration doesn't use the CPI for this purpose. It uses something called the Average Wage Index (AWI).
The AWI is exactly what it sounds like. It's an index of the average wages paid in any given year. Because wages tend to go up faster than inflation, the AWI goes up faster than the CPI.
The Social Security Administration uses the AWI instead of the CPI because the CPI doesn't capture changes in living standards over time. The CPI adjusts for changes in the cost of living, but it doesn't adjust for changes in the quality of life. Simply put, we expect people to live better in 2012 than they did in 1974.
How about $10.74 per Hour? $14.41? $26.96?
If the federal minimum wage had been updated since 1974 using the Social Security AWI, it would now stand at $10.74 an hour. That's quite a bit more than the $9.16 an hour it would be if it had been updated for inflation using the CPI. It's a whole lot more than today's $7.25 an hour federal minimum wage.
A very strong case can be made for a $10.74 minimum wage, which is only 50 cents higher than San Francisco's CPI-adjusted minimum wage.
But that's not the end of the story. The Social Security AWI is based on the changes in people's average annual wages over time. Wages, however, have not kept pace with rising economic prosperity.
Since the 1970s ordinary workers' wages have failed to rise along with the economy as a whole. The massive rise in non-wage income (dividends, interest, and capital gains) has made workers' wages a smaller and smaller slice of the overall pie. America's total personal income per capita — including income from all sources — has risen much faster than the Social Security AWI.
Between 1974 and 2011 the AWI rose a cumulative 17 percent (adjusted for inflation). Per capita personal income, on the other hand, rose 57 percent (adjusted for inflation). Had the minimum wage been indexed to per capita personal income growth starting in 1974, the minimum wage today would be $14.41 an hour.
That's a far cry from $7.25.
By today's standards $14.41 an hour might sound like a lot for a minimum wage, but it doesn't have to stop there. At the top 1 percent of the American income distribution, average incomes rose 194 percent between 1974 and 2011. Had U.S. minimum wages risen at the same pace as U.S. maximum wages, the minimum wage would now be $26.96 an hour.
The difference between $7.25 an hour and $26.96 an hour shows just how much inequality has increased in America over the past four decades.
An Inequality Indicator
Inequality has risen across the developed world in recent years, but nowhere as much as in the United States. Incomes are higher for the top 1 percent in America than anywhere else in the world. And the rest of the world's developed countries in turn have much higher minimum wages.
In Canada, the minimum wage is between 9 and 11 Canadian dollars, depending on the province or territory. That's between $8.59 and $10.50 in U.S. dollars. These figures and the figures below are based on average exchange rates for the three year period 2009-2011.
In the United Kingdom, the minimum wage is £6.08, or about $9.56. In France, it's €9.19, or about $12.44. In Australia, the statutory minimum is A$15.51, or about $14.20, but very few workers earn so little. The standard wage for fast food and other service jobs is A$17.03, or about $15.59.
In all these countries, minimum-wage work also includes benefits like paid sick days and government-sponsored universal health insurance.
So how high should the U.S. minimum wage be? It's currently $7.25. Adjusted for inflation using the CPI it would be $9.16. Adjusted for wage growth using the AWI it would be $10.74, similar to the minimum wages found in other countries.
On the other hand, if the minimum wage had grown along with personal income overall, it would now be $14.41. That would put us on the high end of international comparisons. Once upon a time, America was always on the high end of international comparisons. Maybe someday we'll get there again.
Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney and an associate fellow at the Institute for Policy Studies. An earlier version of this post appeared on the inequality.org website. www.ips-dc.org