"NBA Syndrome" Helps Fuel Spiralling Inequality
It's the NBA syndrome. Thousands of kids believe they'll make the pros, so they focus their lives on basketball rather than on practical career choices. A tiny fraction of 1% make it. So it also goes in American society today, in the league of the very rich, where a tiny fraction owns most of the country's wealth. The schoolyard players - those who will never get near the top - accept this, and even revel in it, for they cherish the American dream of unlimited, almost unimaginable success. Someday, they believe, they will join the ranks of the privileged few on the best team in the league.
Inequality in the U.S. is the worst in the developed world. Right now, weâ€™re seeing the greatest disparity between rich and poor in America since the Great Depression. Research shows that the widening gap is driven by runaway salary growth for the 'working rich.' Between 1970 and 2000 the annual pay increase for wage earners, adjusted for inflation, averaged 5 cents per hour, while CEO raises averaged $660 per hour. According to an acclaimed study by Thomas Piketty and Emmanuel Saez, incomes actually declined for all but the top 10% of American households filing tax returns. New York University economist Edward Wolff also reported that from 1983 to 2004 the bottom 40% of American households experienced a 59% drop in household net worth, to just $2,200.
Yet even with the growing income disparity the tax burden has been shifting from the wealthy elite to the average taxpayer. The top income tax rate for the very rich is 35%, but they pay a very small percentage of their incomes in social security taxes, sales tax, and local taxes. With all of these extra taxes taken into account, the average wage earner pays about a 40% overall tax, about the same percentage as the average American millionaire. Furthermore, wage earners who don't have the money to buy stocks are unable to benefit from the 15% capital gains tax that lowers the overall tax rate for wealthier Americans. In addition, thanks to the Bush tax cuts, the richest 1% of Americans are now scheduled to receive an extra $34,000 per year while the poorest 20% will receive only $77. As a final insult, the very rich are subjected to a much smaller percentage of face-to-face audits by the Internal Revenue Service.
The assault on wage earners goes beyond personal income tax. Even though corporate profits have risen much faster than wages, the portion of federal revenue derived from corporate income tax has decreased from 33% in the 1950s to 12% in 2005. Eighty-two of our largest corporations paid no tax in at least one of the first three years of the Bush administration.
But new players jump right into the game, oblivious to the growing distance between themselves and the few superstars at the top. So they keep on playing for nothing, all the time eyeing the championship banners hanging from the rafters. The wage earners plod along under the regressive burden of income tax, social security tax, sales tax, gas tax, and municipal fees while reading about another rags-to-riches Internet entrepreneur.
This all might be easier to accept if our tax money were paying for health, education, and social services. But according to studies by the National Priorities Project and the Friends Committee on National Legislation, over 40% of each American citizen's tax bill goes for past and present military expenses. The U.S. is responsible for almost half of the world's total military expenditures. We spend twice as much today as we did in the year 2000. For every $1 spent on alternative energy research, we spend $200 on the military. President Bush approved a record U.S. defense budget for 2008 - an increase of 11% to $481 billion. This will be augmented by an additional $200 billion for the wars in Iraq and Afghanistan. National defense will make up almost 60% of all discretionary spending, and every taxpayer will contribute $5000 a year toward military expenses.
A 2003 study by Harvard University's Dominic Johnson proposed that the phenomenon of 'positive illusions' may contribute to an exaggerated belief, especially among men, that they will be successful in competitive situations. This could help explain our eagerness to prolong the Iraqi War and expand the military. This could help explain businessmen like Kenneth C. Griffin, who took home $1 billion in 2006 as the Citadel Investment Group hedge fund manager and declared "We have invested money in countless companies over the years and they have helped countless people." This could explain the 30-year-old basketball player who turns to welfare or crime to support himself after giving up the game.
Paul Buchheit is a professor with the Chicago City Colleges, co-founder of Global Initiative Chicago (GIChicago.org), and the founder of fightingpoverty.org. He is the editor and main contributor to the forthcoming book "American Wars: Illusions and Realities" (Clarity Press).