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

The super-rich have learned a new lesson: it is far better to take than to make.
 
 
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If you want to see what’s wrong with America take a good look at the nauseating list of the 400 richest Americans – the Forbes 400. While the economy struggled to create jobs, it was another banner year for the super-rich. They increased their collective wealth by a whopping $200 billion, which is more than enough to provide every student in the country with free higher education.

Meanwhile, the median middle-class family – the one smack in the middle of the income distribution -- saw its net worth (assets minus liabilities) drop from $102,844 in 2005 to $66,740 in 2010 according to the U.S. Census Bureau. So while the richest 400 Americans increased their wealth by 54 percent since 2005, the median middle-class family saw its wealth decline by 35 percent. Welcome to the new American math.

It’s not easy to wrap our arms around so much financial fat. The numbers involved are truly mind-boggling. Here’s more new math:

  • The richest 400 Americans have as much combined wealth as 25.5 million middle-income Americans. 400 = 25.5 million!

  • The average wealthy member of the Forbes 400 is 63,000 times as rich as the average middle-class family. One = 63,000!

  • It would take the median middle-class family 82,411 years to earn an amount equal to the wealth of the average person on the rich list. That’s the very definition of financial obscenity.

What do the richest of the rich do?

The rich list gives us insight into how wealth is accumulated today. Are the super-rich “wealth creators” who bring new goods, services and jobs to our economy? Or are they “wealth extractors” who cleverly skim it from the rest of us? Here’s the breakdown of the main industries represented by the 400 richest Americans:

Investment

24.0 percent

Media

8.8 percent

Energy

8.0 percent

Food/beverage

7.5 percent

Fashion/retail

5.8 percent

Manufacturing

3.8 percent

Healthcare

3.3 percent

The very first Forbes 400 list, published in 1982, reflects a different economy. Only 9 percent were in finance while 15.5 percent came from manufacturing. But since then our best and brightest have learned a new lesson: it is far better to take than to make.

Why are the super-rich getting richer while the middle-class implodes?

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.

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.

 
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