Sordid Tale of Bob McDonnell Totally Explains Income Inequality
Photo Credit: Gage Skidmore [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
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Just about everything Americans need to know about the surge of income inequality is contained in the 43- page indictment last week of former Virginia Gov. Bob McDonnell.
The Republican governor and his wife are accused of a sleazy exchange -- taking pricey gifts like a silver Rolex watch and gold Oscar de la Renta dresses from a CEO for awarding special state treatment to his business which, by the way, peddles tobacco-laced dietary supplements.
It’s a simple and base transaction. For a bit of personal wealth, a politician sells out the people who elected him, the people who trusted him to serve their interests. Some of the nation’s millionaires and billionaires use politicians’ avarice to buy exclusive deals, policies and laws. This could be big tax breaks for the rich. This could be bailing out Wall Street. This could be refusing to regulate industrial chemicals that poison drinking water when leaked.
These arrangements enrich some politicians and CEOs while impoverishing everyone else. The resulting rising income inequality is deliberate, not an accidental slip of some clumsy invisible hand of the market. More than 230 years ago, Americans rejected a system of governance in which a mass of peasants served a royal few. They chose self-governance for the benefit of the many. America’s 1 percent are short-circuiting that system with Rolex watches and unlimited campaign cash, ensuring the rich get richer and everyone else gets poorer. In other words, engineering income inequality.
So oppressive are income and opportunity inequality now that the likes of the President and the Pope speak of righting these wrongs.
In a statement read last week to the billionaires and world leaders who purchased 1,500 bottles of champagne and 1,350 chocolate-covered strawberries for their five day stay at the Swiss ski resort in Davos that hosted the 44th World Economic Forum, Pope Francis said,“I ask you to ensure that humanity is served by wealth and not ruled by it.”
President Obama has said income inequality is the “defining challenge of our time,” and during his State of the Union address this week, he offered plans to reduce it.
Here’s what the President and the Pope are talking about: Over the past quarter century, a smaller number of Rolex-wearers managed to accrue a larger share of the world’s wealth. Now, the world’s 85 richest people have accumulated more wealth than 3.5 billion people – the world’s poorest half. That’s billion: 3.5 billion humans together have less than 85 individuals.
In the years after the Wall Street crash, between 2009 and 2012, America’s wealthiest 1 percent captured 95 percent of economic growth, while the bottom 90 percent got poorer.
Americans cherish the dream that hard work can change this. But upward mobility is mostly an illusion. Seven out of 10 Americans born into poverty will likely stay there.
In the three decades after World War II, Americans deliberately created the conditions that increased economic opportunity and decreased income inequality. Their methods included charging the rich very high income and inheritance tax rates, providing support for labor unions which enabled workers to successfully bargain for better wages, and nurturing a culture that would not tolerate paying a CEO more for one hour than earned in an entire year by the workers whose labor created the corporation’s profits.
In the past two and a half decades, by contrast, the wealthy deliberately created the conditions that increased income inequality and decreased economic opportunity. Tax rates on the rich so plummeted that quarter-billionaire Mitt Romney paid a lower rate than many middle class Americans. The federal government gives tax breaks to fabulously profitable corporations like GE and ExxonMobil and bailouts to reckless banks like JP Morgan Chase and Citigroup.