10 Ways Our Democracy Is Crumbling Around Us
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And then of course, there’s Gore v Bush where the Supreme Court ordered the halt of a recount in Florida that would have declared Al Gore, not George Bush, as president.
3. Our Skewed Distribution of Income
Sometimes we forget that money in politics wouldn’t matter if our income distribution wasn’t so lopsided. Ever since the Greeks invented democracy, there has been a question about the relationship between political and economic democracy. Is it possible to have political democracy if the income distribution is severely skewed? Of course, you don’t need to have full equality of income to have a viable democracy. But does there come a point when a skewed distribution of income makes a sham of democracy? If we’re not already there, we may be getting close. As this chart shows, we lead the world when it comes to our income gap.
Ratio of CEO Compensation To Average Employee Compensation in 2000
New Zealand 16:1
Hong Kong 38:1
South Africa 51:1
(Source: Michael Hennigan, “Executive Pay and Inequality in the Winner-take-all Society,” Finfacts Ireland, August 7, 2005.)
4. Tax Breaks for the Super-rich
You know the oligarchy is rolling along when it wins enormous tax breaks during good times and bad, under Democrats and Republicans. This shows up in two important ways. First, we see a decline in the top marginal tax rate from 91 percent during the Eisenhower years down to 35 percent today. But what matters even more is the 15 percent marginal rate on capital gains and similar kinds of income. That’s how Mitt Romney gets to pay only 13.9 percent of his massive income in taxes.
While we would love to blame it all on the Republicans, the chart below shows that the effective tax rate on the rich (after all deductions) has been plummeting no matter which party holds office. And although President Obama is currently very upset about the Republicans call for even more tax cuts for the super-rich, he was also unable to raise taxes on top income earners when the Democrats controlled Congress. In addition, the Democrats were unable to close the outrageous carried interest loophole that fattens hedge funds. Nor did they get near passing a financial transaction tax on Wall Street. Oligarchs don’t like to pay. And their money makes sure it stays that way. Is that democracy?
5. Wall Street Bailouts
Another sure sign of financial oligarchy is when the national vault breaks open for Wall Street bailouts and stays open. It’s become clear that too-big-to-fail banks remain far too large to fail. In fact, they have grown larger. They can continue to bet with impunity knowing that if they lose big, we will bail them out again. Under democratic capitalism this is called a “moral hazard.” But really it’s the ancient morality of oligarchy.
The sequence of events leading up to and through the financial crash is a stain on our democracy. First the largest banks and investment houses went on a wildly profitable gambling spree. They created and sold fantasy finance instruments that they knew were toxic to the core. They got their lapdog rating agencies to bless them with AAA ratings. And then they peddled the trash all over the world. Along the way housing prices were puffed up to astronomical highs since high-risk mortgages were needed to create the corrupt securities. Government, after years of ideologically informed deregulation, aided and abetted the entire process. The toxic trash created the crash.