5 Obscene Reasons Why Richest Americans grow Richer As Middle-Class Declines

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5 Obscene Reasons Why Richest Americans grow Richer As Middle-Class Declines

By Les Leopold at AlterNet

http://www.alternet.org/economy/5-obscene-reasons-why-richest-americans-grow-richer-middle-class-declines?paging=off

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To break out of the 1970s economic doldrums, the economics and policy establishment, including leaders of both parties, agreed on a new model. We needed to build an investment-led economy, they said, by cutting taxes, deregulating industry and creating more labor “flexibility” (which is French for union-busting). Together, they argued, these policies would dramatically increase capital investment, which in turn would lead to innovation, more jobs and higher incomes for all Americans. Here’s what actually happened.

1. Tax Cuts for the Super-Rich
Step by step, the tax code was altered to appease and aid the super-rich. First, marginal tax rates were dramatically reduced on the top brackets, falling from a post-war high of 91 percent in the 1950s to 35 percent today. But the biggest giveaway was cutting the capital gains rate to 15 percent. Since most of the super-rich receive their income in the form of capital gains, this was like winning the lottery, each and every year. That’s how Mitt Romney could pay only 13 to 14 percent on his enormous income. As this chart shows, the tax bite is fading away for the super-rich.

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2. Financial Deregulation
Both parties tripped over themselves to assist Wall Street by dismantling nearly all of the critical New Deal financial curbs. Until deregulation, Wall Street was a boring place to work with incomes nearly identical to those with similar education in other sectors. After deregulation it became a gold mine (see chart below). Anti-trust actions to break up big banks no longer occurred. Glass-Steagall (which separated speculative banking from commercial banking) was gutted. Too-big-to-fail casinos flourished (until they crashed) along with ever rising incomes for financiers.

3. Union-Busting
Say what you will about unions, but the fact remains that when unions are strong, the middle-class prospers and the income gap closes. It’s remarkable how the rise of the super-rich and the decline of the middle-class correspond to the generation-long assault on unions. National Labor Relations Board (NLRB) and court rulings combined with new anti-union tactics by employers to make organizing new members more difficult. Also the decline of domestic manufacturing, aided and abetted by rapacious financial engineers, further eroded labor’s base. Until this turns around, the middle-class, as well as the poor, will suffer.

4. The Wall Street Crash and Bailouts
The financial crash devastated the middle-class, largely because its wealth is largely dependent on housing values. When the financial casinos went under, the housing bubble imploded. As the economy nearly came to a standstill in 2008-'09, 8 million jobs vanished in a matter of months, all destroyed by Wall Street’s reckless adventurism. To prevent another Great Depression, Washington bailed out the big banks and hedge funds, but not homeowners. The idea, successfully marketed by Wall Street’s minions in government, was that by saving Wall Street, the economy as a whole would be resurrected. Again, trickledown failed to aid the middle-class as unemployment grew to depression-era levels. Yes, GM and Chrysler received support as well, which kept employment from crashing even further. But Wall Street received most of the booty. No wonder super-rich financiers are prospering.

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