How the Rich Screwed the Rest of Us


[This article deserves to be dinner table conversation.  What we are experiencing in the US, consistent with the historical behavior of empires, is a very successful organized criminal scam by a few to swindle the rest of us, dispossess us of any thing worth stealing (the mortgage fraud alone has impoverished millions) and so reduce us to basic survival concerns that we are even more easily disposed than in the past.  That is the whole US political narrative, and any attempt to divert peoples attention from this grand criminal enterprise is an effort, conscious or unconscious, to further enable the theft.  The US was a very rich country and there is still blood to be drained.  It begins to look, in these dark days, that the crime wave will continue until the country is bled white and dies a humiliating death. ~Herb Ruhs, Boonville]

How the rich screwed the rest of us: The astonishing story of the last few decades is a massive redistribution of wealth, as the rich have shifted the tax burden.

Over the last half-century, the richest Americans have shifted the burden of the federal individual income tax off themselves and onto everybody else. The three convenient and accurate Wikipedia graphs below show the details. The first graph compares the official tax rates paid by the top and bottom income earners. Note especially that from the end of the Second World War into the early 1960s, the highest income earners paid a tax rate over 90 percent for many years. Today, the top earners pay a rate of only 35 percent. Note, also, how the gap between the rates paid by the richest and the poorest has narrowed. If we take into account the many loopholes the rich can and do use far more than the poor, the gap narrows even more.

One conclusion is clear and obvious: the richest Americans have dramatically lowered their income tax burden since 1945, both absolutely and relative to the tax burdens of the middle income groups and the poor.

Historical tax rates for the highest and lowest income earners.

Historical tax rates for the highest and lowest income earners.

Consider two further points based on this graph: first, if the highest income earners today were required to pay the same rate that they paid for many years after 1945, the federal government would need far lower deficits to support the private economy through its current crisis; and second, those tax-the-rich years after 1945 experienced far lower unemployment and far faster economic growth than we have had for years.

The lower taxes the rich got for themselves are one reason why they have become so much richer over the last half-century. Just as their tax rates started to come down from their 1960s heights, so their shares of the total national income began their rise. As the two other Wikipedia graphs below show, we have now returned to the extreme inequality of income that characterized the US a century ago.

Share of national income taken by top tranches of earners.

Share of national income taken by top tranches of earners.

The graph above shows the portion/percentage of total national income taken by the top 1 percent, the top tenth of a percent, and the top 100th of a percent of individuals and families: the richest of the rich. The third graph compares what happened to the after-tax household incomes of Americans from 1979 to 2005 (adjusted for inflation). The bottom fifth of poorest citizens saw their income barely rise at all. The middle fifth of income earners saw their after-tax household income rise by less than 25 percent. Meanwhile, the top 1 percent of households saw their after-tax household incomes rise by 175 percent.

Relative increases in net household incomes of Americans from 1979 to 2005.
Relative increases in net household incomes of Americans from 1979 to 2005.

In simplest terms, the richest Americans have done by far the best over the last 30 years; they are more able to pay taxes today than they have been in many decades, and they are more able to pay than other Americans by a far wider margin. At a time of national economic crisis, especially, they can and should contribute far more in taxes.

Instead, a rather vicious cycle has been at work for years. Reduced taxes on the rich leave them with more money to influence politicians and politics. Their influence wins them further tax reductions, which gives them still more money to put to political use. When the loss of tax revenue from the rich worsens already strained government budgets, the rich press politicians to cut public services and government jobs and not even debate a return to the higher taxes the rich used to pay. So it goes – from Washington, to Wisconsin to New York City.

How do the rich justify and excuse this record? They claim that they can invest the money they save from taxes and thereby create jobs etc. But do they? In fact, cutting rich people’s taxes is often very bad for the rest of us (beyond the worsening inequality and hobbled government it produces).

Several examples show this. First, a good part of the money the rich save from taxes is then lent by them to the government (in the form of buying US Treasury securities for their personal investment portfolios). It would obviously be better for the government to tax the rich to maintain its expenditures, and thereby avoid deficits and debts. Then, the government would not need to tax the rest of us to pay interest on those debts to the rich.

Second, the richest Americans take the money they save from taxes and invest big parts of it in China, India, and elsewhere. That often produces more jobs over there, fewer jobs here, and more imports of goods produced abroad. US dollars flow out to pay for those imports and so accumulate in the hands of foreign banks and foreign governments. They, in turn, lend from that wealth to the US government because it does not tax our rich, and so we get taxed to pay for the interest Washington has to give those foreign banks and governments. The largest single recipient of such interest payments today is the People’s Republic of China.

Third, the richest Americans take the money they don’t pay in taxes and invest it in hedge funds and with stockbrokers to make profitable investments. These days, that often means speculating in oil and food, which drives up their prices, undermines economic recovery for the mass of Americans and produces acute suffering around the globe. Those hedge funds and brokers likewise use part of the money rich people save from taxes to speculate in the US stock markets. That has recently driven stock prices higher: hence, the stock market recovery. And that mostly helps – you guessed it – the richest Americans who own most of the stocks.

The one kind of significant wealth average Americans own, if they own any, is their individual home. And home values remain deeply depressed: no recovery there.

Cutting the taxes on the rich in no way guarantees social benefits from what they may choose to do with their money. Indeed, their choices can worsen economic conditions for the mass of people. These days, that is exactly what they are doing.

[Addendum: From Dave Smith, Ukiah]

Progressives United


Governor Scott Walker’s attack on working men and women in Wisconsin has helped put a real face – better yet, hundreds of thousands of faces – on the cost of corporate influence in politics.

And every night that the protests in Madison dominate the news, that awareness is growing.

Wisconsin is currently ground zero for this fight, but make no mistake, big money and corporations are waging these battles all over America.

I founded Progressives United so we could stand up to these very forces that are hijacking our democracy. But I need your voice to do it.

Where else do you see the corrupting influence of corporate power? Where else, as Progressives United, should we take this fight?

Share your ideas about where we need to broaden our fight against corporate political influence today — and vote for the ideas that your fellow progressives share, too.

Together, we’re going to keep fighting each and every day until we win in Wisconsin.

As the prank call with a fake David Koch made clear, Governor Walker views himself as part of a larger corporate conservative agenda. Walker talked as though he worked for Mr. Koch, and he’s using his big-government-at-its-worst approach to test the waters of busting up unions for Mr. Koch and his other right-wing corporate backers.  This is a national fight for conservatives and we must take this opportunity to make this a national fight for progressives.

It cannot end in Wisconsin.

So we’ve launched a project so members of the Progressives United community can share their ideas about where else we need to take this fight, and your fellow progressives are counting on your participation.

Help set the agenda for Progressives United. Weigh in on how – and where — we should be focusing our energy.

Last year, as I worked with colleagues to pass the DISCLOSE Act, the news media did not give significant coverage to the rising problem of corporate influence in politics in a post-Citizens United America.

But the protests in Madison — and Ohio, and Indiana, and now in every state in the country – show Americans far and wide already understand how dangerous the problem is.

We need to decide how to expand what started in Wisconsin to the battle against corporate influence nationwide. What should we focus on next?

Share your ideas with the Progressives United community and me — and vote up the other ideas you think are best.

After barely more than a few weeks in office, Wisconsin’s Governor Walker has damaged our state for years to come. We can’t let the same thing happen to our nation. We need to fight back. United.

Thank you for uniting with progressives,

Russ Feingold signature

Russ Feingold
Progressives United

P.S. I founded Progressives United to give people like you a greater voice in our political system and fight back against the corrosive corporate influence in politics. Now I need progressives like you to join me and tell us where you think we should take our fight next.

I hope you’ll share your ideas and join this critical dialogue today.



“Trickle down” – yeah, right! They aren’t called “peons” for nothing.

As the piece so ably illustrates, this almost complete robbery has been ongoing for decades. The wealth has already been snatched. How can it be recovered – if that is even possible – without some sort of violent overthrow to strip the rich of their loot, and/or a complete reset of the global financial structure to level everything out? And we would still be left with a planet on tilt. There is no plausible way to conveniently fix this particular mess.

In the mid thirties the US population was in headlong resistance to corporate rule under eerily similar circumstances of dispossession that we face today. Nearly identical concentration of wealth, similar terroristic threats and attacks by government against dissidents such as the military attack by regular army troops, under the leadership of officers who would become prominent in WWII, against the Bonus Marchers, police attacking demonstrators and killing strikers. Very deja vu. The people, in that case, won a temporary victory and led the country into a bright period of increasing wealth at the bottom as well as at the top. Wealth is something that drives folks crazy. Once susceptible individuals have enough they can’t stop trying to get more. Add to this the privileging of the intelligent sociopathic brain damaged folks by concentrating the greatest wealth in their hands as they “compete” without moral or ethical restraint, a process that had not proceeded to the current degree in the thirties, and there is no choice any more. It will be necessary to tear the whole edifice of our corrupt institutions, much as one would choose to demolish a house riddled with termites, and replace them with cultural forms that do not concentrate wealth and are decentralized and defend local sovereignty. Reform becomes a dead end game.

As I have mentioned before on this blog, the only way out that I can see is a general destruction of the information systems of the planet by high altitude nuclear explosions. This eventuality comes ever nearer as the US military contemplates trying to disarm the Pakistani nuclear forces. Whatever liberates us, in the unlikely event that we find our way out of this trap of our own making, will most likely be something no one has anticipated since the system of world wide oppression seems to have prepared for every eventuality. A peaceful alternative, though one that seems highly improbable, was put forward by Daniel Quinn (author of Ishmael) in his book Beyond Civilization. He says that we should just disengage with the system and find ways to survive that do not make us dependent on abusive authority. I like Quinn’s story better than mine on an emotional level, but the cortex remains dubious.